Private ruling: Sale of subdivided property
Date of advice: 8 October 2015
Published: October 2015

Ruling: Q1: Are you required to be registered for GST pursuant to section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No, as your subdivision of the Property does not amount to an enterprise and is a mere realisation of a capital asset, you are not required to be registered for GST.

Relevant facts and circumstances: You are not registered for GST. You own the Property. You purchased the Property, with finance, on ddmmyyyy for the purpose of establishing your family home. However, the Property no longer suits the needs of the family, thus the Property Is being sold in order to buy elsewhere. At purchase date, the Property had an existing development approval for a four block subdivision. The development approval was not acted upon and lapsed without further action from you. In contemplation of using the Property as your family home, you conducted a number of improvements on the Property. The improvements included: • extensive landscaping, including planting trees and shrubs; • substantial renovations of the existing house located on the Property, costing approximately $xx; and • construction of fencing across the property, costing approximately $xx. You have not claimed any personal income tax deductions in relation to the costs associated with the improvements you made to the Property. In yyyy, you sought to sell the Property; however, the base value of the property had fallen. In yyyy, in an attempt to attract potential developers, you applied for development approval for a subdivision to make the land more attractive for sale. This subdivision was approved in mmyyyy, however, you were unable to sell the Property at this time. You are again seeking to sell the Property. You have been advised by real estate agents and town planners that subdividing the Land into smaller lots will facilitate the sale of the Property. However, they have also advised you that any potential profit from the subdivision of the Property is small. This has made it unattractive to potential developers notwithstanding development approvals having been granted over the Property. Based on this advice, you further applied for development approval for a five block subdivision of the Property in mmyyyy. This subdivision was approved in mmyyyy and you are now seeking to subdivide the Property and sell the individual lots. You intend to facilitate the sale of the subdivided lots by removing the substantial improvements previously made to the Property. You may also undertake minimal (and only to the extent essential) works to improve the presentation of the lots for sale. The cost of the subdivision and related activities will be paid for from your personal savings. You have not previously conducted any development activities in your own right.

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