Private ruling: GST and the supply of a property
Date of advice: 6 February 2018
Published: June 2018

Ruling: Q1: Will the sale (supply) of the vacant land (the property) be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No.

Relevant facts and circumstances: Entity A (you) signed a contract to purchase the property on a certain date. The contract price was $xxx. A house that was on the property when the contract was signed was demolished prior to settlement. You initially purchased the property with the intention of building your private residence on it. After conducting research, you felt that it would be far beyond your capability to undertake a project of building your own residence. You and your associates have never had any experience in the construction industry. No building permit or town planning activities have been undertaken after settlement. You are not registered for an Australian Business Number or GST.

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

Reasons for decision: Summary: A supply is taxable where all the paragraphs under section 9-5 of the GST are satisfied. This section provides: You make a taxable supply if: (a) you make a 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 (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. Where you supply the property and receive consideration and it is sold in Australia both paragraph 9-5(a) and (c) of the GST Act would be satisfied. We now need to consider paragraphs 9-5(b) and (d) of the GST Act. For paragraph 9-5(b) of the GST Act to be satisfied the supply must be made in the course or furtherance of an enterprise that you carry on. Section 9-20 of the GST provides for what an enterprise is. The types of activity or activities that can amount to being an enterprise, amongst others, is where they are 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. The purchase or supply of a private asset is not considered, without other activity, to amount to being an enterprise. This is due to your intention when purchasing the property being of a private nature as you planned on constructing your private residence. Hence, the supply of the property is of a private nature as you have not undertaken any other activity that would amount to you carrying on an enterprise. Therefore, the supply of the property will not be made in the course or furtherance of an enterprise that you carry on and paragraph 9-5(c) of the GST Act will not be satisfied. As this paragraph is not satisfied there is no need to consider paragraph 9-5(d) and you will not make a taxable supply under section 9-5.