Private ruling: Subdivision of residential land – sale of vacant land – part of main residence
Date of advice: 21 March 2019
Published: May 2019
Ruling period: 1 July 2018 to 30 June 2019 | 1 July 2019 to 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Are you required to register for GST when selling a subdivided portion of your residential block? | A1: No Section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) defines enterprise to include: an activity, or a series of activities, done: (a) in the form of a business; or (b) in the form of an adventure or concern in the nature of trade. Paragraph 178 to 179 of Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number provides indicators of carrying on a business. Based on the facts provided and applying the above, you are not carrying on an enterprise. Section 23-5 of the GST Act provides that you are required to be registered for GST ‘if: (a) you are carrying on an enterprise; and (b) your GST turnover meets the registration turnover threshold’. As you are not carrying on an enterprise in regard to the subdivision of land, you are not required to be registered for GST and consequently not required to charge GST. The sale of the subdivided lot is considered to be a mere realisation of your capital asset.

Relevant facts and circumstances: You originally purchased your main residence after 20 September 1985 with another person with the intention of it being your main residence. You still live there but the other person moved out. With the assistance of a family member, you bought out the other person’s interest in the property. The property is to be subdivided so as to reduce the financial obligations on a property that was previously serviced by two working individuals. To obtain permission for the subdivision a planning permit is required. You obtained the building permit to allow the purchaser to build immediately. The land has not been subdivided as the application is still with the council. You will be selling the subdivided land as is without erecting any buildings or structures. After the subdivision, there will be two lo ts. There will be a small section of common property. The subdivided block is expected to be sold for $X. You have not been involved in subdivisions previously.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5