Private ruling: GST and sale of vacant land
Published: June 2015

Ruling: Q1: Will the sale of your interest in a block of land (the Land) be a taxable supply and subject to GST? | A1: No.

Relevant facts and circumstances: You are not registered for GST. You have an equal share of a vacant block of land (the Land) as a tenant in common with a number of family members. The Land is a number of acres in size and is zoned village. The Land was previously a larger size. A number of years ago the larger block of land was, subdivided into the existing block and a second, smaller lot solely owned by another family member. You and your family purchased the Land with the intention of using it during certain times of the year for personal, recreational purposes. You have made no further changes to the Land and it has no buildings erected on it. Up until some years ago, the Land was rented for a period for a nominal amount to an animal breeder for grazing purposes under a verbal agreement. The tenant was also required to keep the Land clear of weeds and the fences in good repair. The Land has not been used for any other business purpose during your ownership. You and the other owners are selling the Land with the assistance of a local solicitor and real estate agent. The contract for sale shows the vendor as being you and the other tenants in common.

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, and | A New Tax System (Goods and Services Tax) Act 1999 Section 9-40.

Reasons for decision: Summary: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on any taxable supply that you make. Section 9-5 of the GST Act, provides that you make a taxable supply if: (a) you make the supply for consideration (b) the supply is made in the course or furtherance of an enterprise that you carry on (c) the supply is connected with Australia, and (d) you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. You own a fractional interest in a vacant block of land as a tenant in common with a number of family members. You and your family now intend to sell your fractional interests in this land. Goods and Services Tax Ruling GSTR 2004/6 Goods and services tax: tax law partnerships and co-owners of property (GSTR 2004/6) provides guidance on the GST consequences for co-owners of an income producing property. Paragraph 20 of GSTR 2004/6 provides that a tax law partnership exists only if there is an association of persons 'in receipt of income jointly'. As the Land is not being used for an income producing purpose it is not necessary to consider whether there is a tax law partnership between you and the other co-owners. As such we will consider your supply of your fractional interest in the Land. ATO Interpretative Decision ATO ID 2004/807 Goods and Services Tax GST and supply of a fractional interest in land by a tenant in common (ATO ID 2004/87) provides guidance on the situation where a tenant in common is not carrying on an enterprise in partnership with a co-owner and sells their fractional interest in the land. The Butterworths Australian Property Law Dictionary , 1997, P E Nygh & P J Butt Eds, Butterworths, Sydney defines 'tenancy in common' as: A type of co-ownership where two or more persons own distinct interests in the same piece of property. The tenants in common hold undivided shares, possessing the property in common and without exclusive possession of any part of it. The shares may be in different proportions. Tenants in common may deal with their respective shares as they wish during their lifetime, and usually may devise them by will... Accordingly, as tenants in common, not carrying on an enterprise together, you and the co-owners are making separate supplies of your respective interests in the vacant land in your own capacities when the Land is sold. When you sell your interest in the Land in question, you will be making a supply of land in Australia for consideration and will thereby satisfy paragraphs 9-5(a) and (c) of the GST Act. Therefore it is necessary to determine whether your supply of your interest in the Land will be made in the course or furtherance of an enterprise carried on by you and therefore, whether you will be required to be registered for GST. The term 'enterprise' is defined in section 9-20 of the GST Act and includes an activity or series of activities done, in the form of a business, or in the form of an adventure or concern in the nature of trade, or on a regular or continuous basis, in the form of a lease, license or other grant of an interest in property. As per the facts provided you are not carrying on any enterprise in respect to your fractional interest in the Land. Therefore, you do not satisfy paragraph 9-5(b) of the GST Act. As all the requirements of a taxable supply under section 9-5 of the GST Act are not satisfied, the sale of your interest in the Land will not be a taxable supply and will not be subject to GST.