Private ruling: GST and sale of vacant land
Published: November 2013

Ruling: Q1: Is the sale of your vacant land (the property) a taxable supply? | A1: No.

Relevant facts and circumstances: You are in the process of selling the property. You acquired the property on a specified date for the purpose of building your primary residence. You had approved plans to build a home on the land but due to work commitments, you relocated to another State/Territory on a specified date. The property has been left vacant with no improvements since then. You have not received any income from the property, you have not claimed any loss or expenses or treated this property as a business asset or used it in any business activities. You have not acquired additional land to add to the original parcel. You did not purchase the property with the intention of resale at a profit. You used the proceeds of the sale of other assets as well as borrowed funds to finance the acquisition of the property.

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

Reasons for decision: Summary: The sale of the property is not a taxable supply. | Detailed Reasoning - Detailed reasoning: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make. You make a taxable supply if the supply meets all of the requirements of section 9-5 of the GST Act. Section 9-5 of the GST Act 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 Australia; 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. (* denotes a term defined in section 195-1 of the GST Act) One of the requirements for a supply to be a taxable supply is that the supply is made in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act). Section 9-20 of the GST Act provides that enterprise includes, among other things, an activity or serries of activities done: · in the form of a business, or · in the form of an adventure or concern in the nature of trade. Miscellaneous Taxation Ruling MT 2006/1 provides the view of the Tax Office on the meaning of enterprise for the purposes of entitlement to an Australian Business Number. Goods and Services Tax Determination GSTD 2006/6 provides that the discussion in MT 2006/1 equally applies to the term enterprise as used in the GST Act and can be relied on for GST purposes. MT 2006/1 provides that 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 commercial activity that does not amount to a business but which has the characteristics of a business deal. However, the mere realisation of investment or private assets does not amount to trade. Additionally, the fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature. You advised that you did not purchase the property with the intention of resale at a profit. You acquired the property on a specified date to build your primary residence but due to work commitments, you relocated to State/Territory on a specified date. The property has been left vacant with no improvements since its acquisition. You have not received any income from the property, have not claimed any loss or expenses in relation to the property and have not brought the property into account as a business asset. Based on the information that you have provided, the sale of the property is a mere realisation of an investment asset. Your activities in respect of the acquisition and sale of the property are not in the form of a business or an adventure or concern in the nature of trade. The sale of the property therefore is not made in the course or furtherance of an enterprise that you carry on. As such, the requirement in paragraph 9-5(b) of the GST Act is not be satisfied. As the sale of the property does not meet all the requirements of section 9-5 of the GST Act, the sale is not a taxable supply.