Private ruling: GST and the sale of land
Date of advice: 6 July 2015
Published: July 2015

Ruling: Q1: Will the sale of the Land be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. The requirements of a taxable supply include that you are registered or required to be registered for GST. You are a tax law partnership carrying on a commercial leasing enterprise on the Land. We do not consider your activities in relation to obtaining the development approvals and selling the Land amount to an enterprise in their own right. The sale of the Land constitutes the transfer of ownership of a capital asset for the purposes of section 188-25 of the GST Act and will be disregarded when calculating your projected turnover. As the value of the transfer of the Land is excluded from the calculation of your GST turnover, you are not required to be registered pursuant to section 23-5 of the GST Act. Therefore, you are not making a taxable supply when you sell the Land and there will be no GST applicable.

Relevant facts and circumstances: Entity A is registered for GST. Entity B is not registered for GST. Entity A acquired the Land in 19XX for the purpose of building a house and commencing farming. In 19XX part of the Land was transferred to Entity B. Entity C (You) own the Land as tenants in common. A house (your primary residence) was constructed within X years of acquiring the Land. The Land has been continuously held by you, however the farming business has been carried out by Entity D. Entity D is registered for GST. No formal lease has been executed and regular rental has never been paid. The Land continues to be used for farming. In 20XX adjacent land was being rezoned to facilitate urbanisation. Increased urbanisation would make it more and more difficult to operate a farming business in the area. You decided to dispose of the Land. In 20XX you engaged a town planning firm to investigate how best to sell the Land. The firm submitted a rezoning application for you and other surrounding land owners. In 20XX the Land was rezoned. In 20XX the Land was again rezoned. Completion of the rezoning process coincided with the global financial crisis and you considered it was not an appropriate time to sell the Land. Entity D continued to farm the Land, whilst you continued to look for ways to realise the value of the Land. Your preference has always been to sell the Land as one lot. However, you were advised to consider subdivision and an application for subdivision was approved on DDMMYYYY, subject to conditions. As the first subdivision approval was coming to an end, a further subdivision application was made which was very similar to the first, and this was approved on DDMMYYYY. The approval is valid for X years and also subject to similar conditions as the first approval. In 20XX the property market picked up again, and you engaged consultants to provide costings. It was found significant costs were involved and you proceeded no further. Having considered the costs and difficulties in subdivision, you decided to keep to your original intentions and sell the Land as one lot. Throughout, you have not completed any physical work on the Land other than the construction of your residence and structures required for the Entity D farming operations. No contractors have been engaged to undertake any redevelopment activities and no agents have been engaged to sell the Land. You are in negotiations with two entities to sell the Land as tenants in common. The only land held by Entity A and Entity B together is the Land.

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 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Section 23-5, and | A New Tax System (Goods and Services Tax) Act 1999 Division 188.