Private ruling: GST and the subdivision of land
Date of advice: 7 September 2016
Published: November 2016

Ruling: Q1: Will your supply of the subdivided land at the Property be a taxable supply? | A1: No. One of the requirements for making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) is that the supply is made in the course or furtherance of an enterprise that you carry on. We do not consider the sale of the Property to be in the course of your enterprise. Nor do we consider your activities in relation to the subdivision and sale of the Property amount to the carrying on of an 'enterprise' as defined in section 9-20 of the GST Act. Therefore as the sale of the subdivided land will not be in the course or furtherance of an enterprise that you carry on, it will not be a taxable supply.

Relevant facts and circumstances: You are not registered for GST. You are carrying on an enterprise. You purchased Lot X (the Property) for X, with settlement occurring on DD MM YYYY. The land area of the Property is X hectares. You purchased the Property for the purpose of building a house on it. However, you travelled overseas for approximately X months after you had purchased the Property and opened a business in X when you returned from your travels, at which point you did not have enough funds to build a house on the Property. The Property was zoned as 'special rural' when it was purchased. The township of X has expanded and the property has been rezoned as 'residential'. From DD MM YYY until the present time, you have not purchased any additional land or private dwellings, and have resided in rental properties. The Property has been vacant since it was purchased and has not been used to produce assessable income. You listed the Property with a real estate agent, however you did not receive any offers to purchase the whole property. The Property continued to be listed with the real estate agent as an 'open agency' for a further period of X months. You received numerous enquiries from interested parties who had not wanted to purchase the whole Property, but who were interested in purchasing smaller lots. You have recently retired from full-time employment and require funds to build your main residence, as you are still renting. The Property is too large for you to manage at your stage of life. As you could not sell the Property as a whole, you are now subdividing the Property and selling the subdivided blocks of land (the Project). The Project will be financed by a bank loan secured by taking out a mortgage over the Property. The loan is conditional upon the pre-sale of X of the proposed subdivided blocks of land. You have engaged the services of the Developer to manage the subdivision of the Property (the Project). On DD MM YYYY, an application for the subdivision of the Property was lodged by the Developer. On DD MM YYYY, approval for the subdivision was given for the Property to be subdivided into X subdivided blocks of land. You will not have any involvement in the Project other than attending meetings and addressing enquiries with the Developer. You do not intend to keep any of the subdivided blocks of land unless they cannot be sold on the open market. The services of real estate agents will be engaged to sell the subdivided blocks of land. The proposed subdivided blocks of land were put on the market in DD MM YYYY, for 'off the plan' sales of the subdivided blocks of land. At this point X proposed subdivided blocks of land have been sold. You have not undertaken any land subdivision and sale activities in the past and do not intend any similar activities in the future. You will sell X of the proposed subdivided blocks of land and will obtain the bank loan to finance the subdivision of the Property. You will use the services of other parties to undertake the management and co-ordination of the subdivision of the Property. You will not undertake any activities in relation to the subdivision of the Property. Only the absolute minimum that council requires to satisfy the development application will be undertaken in relation to the subdivision of the Property. No buildings will be erected on the land.

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.