Private ruling: GST and sale of vacant land by executor of deceased estate
Date of advice: 13 August 2018
Published: October 2018

Ruling: Q1: Is the sale of vacant land located at the specified address in Australia (the Property/the XYZ Land) by you (The Trustee for The Estate of <the named individual> Deceased) a taxable supply under section 9-5 of the GST Act and is GST payable on the supply? | A1: No, the sale of the Property by you is not a taxable supply under section 9-5 of the GST Act and GST is not payable on the supply.

Relevant facts and circumstances: The named individual (the Deceased) passed away on ddmmyyyy and under the Will of the Deceased, you (named person) were named as the executor (the Executor) and trustee (the Trustee) of the deceased’s estate. You are also the residuary beneficiary. You were granted probate by the Supreme Court of Queensland on ddmmyyyy. A request was made to the named State’s Titles Registry office for you to be registered as proprietor of lots A and B (the Property) on Title reference: <number specified>, as personal representative. The Property is vacant and is located at the specified address in Australia and is referred to as the XYZ Land. You became the registered owner of the XYZ Land on ddmmyyyy. In your capacity as the Trustee, you are carrying on a leasing enterprise in relation to a specified number of properties known by their specified names and are registered for GST from ddmmyyyy. The Deceased’s Will was challenged by the Executor’s siblings. The Will was also challenged under the Testators Family Maintenance provisions of the Succession Act 1999 . The court case was resolved by settlement reached on ddmmyyyy, when the Supreme Court of the named State issued an order for the settlement. In order to fulfil your obligations under the Will and the settlement agreement, you entered into a Sale Contract dated ddmmyyyy for the sale of the XYZ Land for $. The sale was to raise money to pay the legacies of $ due to your siblings and thus pay out your siblings’ interests in the estate. The original house on the Property was demolished by the Council between ddmmyyyy and ddmmyyyy after a fire destroyed the building. The Deceased did not conduct any improvements or undertake any subdivision activity on the land before her death, You carried out some preliminary consultation and research with a town planning firm regarding the best use of the land; however, you did not lodge a development application in respect of the XYZ Land with the Council. Instead, you appointed the named agent for the sale of the property in its current condition. The Trustee previously applied for a private ruling on ddmmyyyy in relation to the sale of another property located at the specified address (the ABC Land) for the sale price of $. In response to your application, the Commissioner issued a private ruling on ddmmyyyy and advised that the sale of the ABC Land was not a taxable supply and GST was not payable on the sale.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 Section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision: Summary: Under section 9-40, an entity must pay the GST payable on any taxable supply that the entity makes. Section 9-5 states: You make a taxable supply if: (a) you make the supply for * consideration; and (b) the supply is made in the course or furtherance of an * enterprise that you *carry on; and (c) the supply is * connected with the indirect tax zone; and (d) you are * registered, or * required to be registered . However, the supply is not a * taxable supply to the extent that it is * GST-free or * input taxed . Note: ● Terms marked with an asterisk are defined under section 195-1. ● If a provision of the GST Act uses the expression ‘you’, it applies to entities generally, unless its application is expressly limited. We consider the provisions in Divisions 38 and 40 do not apply to the facts of this case to make the supply of the XYZ Land a GST-free or an input taxed supply respectively. Accordingly, we will consider if all of the requirements specified in paragraphs 9-5(a) to (d) are satisfied for the sale of the Property to be a taxable supply. In this case: ● You are registered for GST from ddmmyyyy. ● The Sale Contract specifies the purchase price of the Property as $. ● The Property is located in Australia. Accordingly, the conditions specified in paragraphs 9-5(a), (c) and (d) are satisfied. Paragraph 9-5(b) requires the supply to be made by an entity in the course or furtherance of an enterprise that the entity carries on. Accordingly, we need to determine whether the sale of the Property by you was made in the course or furtherance of an enterprise that you carry on. Subsection 9-20(1) defines the term ‘enterprise’. Of relevance, in your case, are paragraphs 9-20(1)(a), (b) and (c) which state that an enterprise is an activity, or 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; or (c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or In considering the term ‘enterprise’ we also refer to the guidelines in 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 (MT 2006/1). Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? states that the ABN Act uses the definitions of these terms that are contained in the A New Tax System (Goods and Services Tax) Act 1999 . The principles in MT 2006/1 apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes. MT 2006/1 explains: 234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. 244. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal… 262. The question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions. 263. The issue to be decided is whether the activities are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset… 266. In determining whether activities relating to isolated transactions are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case. This may require a consideration of the factors outlined above, however there may also be other relevant factors that need to be weighed up as part of the process of reaching an overall conclusion. No single factor will be determinative rather it will be a combination of factors that will lead to a conclusion as to the character of the activities. 303. Paragraph 9-20(1)(c) of the GST Act includes in the definition of an 'enterprise', 'an activity, or a series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property'. The paragraph does not cover trading in the assets but rather the activity of a lessor or grantor of the interest in the property. 306. To be an enterprise the grant of a lease, licence or other grant of an interest in property must be done on a regular or continuous basis. The grant need not be done on both a regular and a continuous basis. An activity will be 'continuous' if there is no significant cessation or interruption to the activity. An activity is 'regular' if it is repeated at reasonably proximate intervals. The intervals need not be fixed. Whether an activity is repeated over time on a regular basis is a question of fact and degree. In your case: ● You have recently sold a specified number of properties. ● The XYZ Land was vacant land that was not leased or used to carry out any activities. ● The XYZ Land did not form part of the leasing enterprise that you carry on. ● The sole purpose for the sale of the XYZ Land was to raise money and use the sale proceeds towards fulfilling the Executor’s obligations in relation to the Deceased’s Will and the court ordered settlement. That is, to make payments towards the legacies of $ due to your siblings and thus pay out your siblings’ interests in the estate. In referring to the activities done in relation to the recent sales of properties, the sale of the XYZ Land may be considered as an activity done on a regular basis in the form of a grant of an interest in property and would therefore satisfy the definition of an enterprise under paragraph 9-20(1)(c). However, we have also taken into account all other relevant factors and surrounding circumstances including that of the sale being intended to raise money towards fulfilling the Executor’s obligations in relation to the Deceased’s Will and the court ordered settlement, that is, to pay the legacies of $ due to your siblings and thus pay out your siblings’ interests in the estate. In weighing up all these factors and circumstances, we have concluded it is reasonable to determine that the sale of your property located at the specified address in Australia does not amount to an enterprise for the purpose of the GST Act. This means the requirement for a taxable supply in paragraph 9-5(b) is not met and the sale is not a taxable supply under section 9-5. As such, GST is not payable on the sale.