Private ruling: GST - compulsory acquisition
Date of advice: 27 May 2025
Published: 28 July 2025
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: XX February 20XX

Ruling: Q1: By entering into a written agreement with the state Minister in 20XX for the compulsory acquisition of land, will the Fund be making a taxable supply for the purposes of the GST Act? | A1: No.

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. X and Y as Trustees for the X&Y Superannuation Fund (Fund) own Z (Land). The Fund does not use the Land to derive income, does not carry on an enterprise, and is not registered for GST. The state's Minister of D (Minister) approached the Fund about the compulsory acquisition of the Land as a potential new M site, under the terms of the Z Act (Land Acquisition Act). Following negotiations between the Fund and the Minister, the parties entered into a written agreement in February 20XX for the compulsory acquisition of the Land by the Minister, pursuant to section W of the Land Acquisition Act (Acquisition Agreement). All relevant matters pertaining to the compulsory acquisition and the amount of compensation to be paid to the Fund are set out in the Acquisition Agreement. The agreed amount of compensation was $V per square metre of the Land (exclusive of GST), amounting to a total of $Y (exclusive of GST) (Part 1 of Schedule 1 to the Acquisition Agreement), payable by way of a deposit of $P (Part 1 of Schedule 1) within seven days of entering into the Acquisition Agreement, with the balance payable within five business days after the publication of the Notice of Compulsory Acquisition in the Gazette. Clause 5.2 of the Acquisition Agreement requires the Minister to complete the compulsory acquisition within the "Acquisition Window" which is defined to end on V 20XX. Despite Clause 13.3(5) of the Acquisition Agreement explicitly stating by reference to Goods and Services Tax Ruling GSTR 2006/9: Supplies the parties' view that "that there is no GST payable" in respect of the acquisition of the Land by the Minister, the Fund received a deposit of $Q instead of $P. However, the Minister's office confirmed in writing on 19 May 2025 to the Australian Taxation Office that this was an error.

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

Reasons for decision: Summary: A taxpayer makes a taxable supply if the terms of section 9-5 of the GST Act are satisfied, being a) you make the supply for consideration; and b) the supply is made in the course or furtherance of an enterprise that you carry; and c) the supply is connected with the indirect tax zone; and d) you are registered, or required to be registered. (Section 9-5 contains a proviso to the effect that a supply cannot be a taxable supply to the extent that it is GST-free or input taxed. This proviso is not relevant to the taxpayer's circumstances.) All four requirements in section 9-5 need to be met in order for a supply to be a taxable supply. As a threshold, however, there must have been a supply made, and the question arises in any situation involving a compulsory acquisition of real property as to whether this threshold is met. That is because in many compulsory acquisition situations, the actions of the landowner can be minimal, if not materially non-existent, and the supply can be given effect by the power of vesting in the relevant government authority without the landowner's involvement (or even consent). We discuss those situations in Goods and Services Tax Ruling GSTR 2006/9: Supplies (GSTR 2006/9) because it is our view that for a supply to be made, something must be provided by an entity to another entity (Proposition 5). Thus, it is our view, expressed at paragraph 76 of GSTR 2006/9, that ...there will be no supply where something occurs by operation of law without an entity providing something or without any obligation being placed on the entity to provide something. In our discussion of Proposition 5 in GSTR 2006/9 and, in particular, the effect of a compulsory acquisition carried out by vesting pursuant to a Gazette notice, we stated at paragraph 82: The effect of the gazettal notice is that the legal ownership of the land, described in the notice, is vested in the authority acquiring the land, and that the land becomes freed from any other interests. The entity's interest in the land, whether legal or equitable, is extinguished. When land vests in an authority in consequence of a gazettal notice, it is necessary to examine the relevant facts and circumstances to determine whether or not the owner makes a supply of the land to the authority. In cases where land vests in the authority as a result of the authority seeking to acquire the land, and initiating the compulsory acquisition process pursuant to its statutory right, then the owner does not make a supply. This is because the owner does not provide anything to the authority. It takes no action to cause its legal interest to be transferred or surrendered to the authority. It has no obligation to do anything, to refrain from doing something or to tolerate an act or situation. In our view, the Fund has not made and will not make a supply of the Land because the compulsory acquisition process was initiated by the Minister and is to be completed by the publication of a Gazette notice giving effect to the transfer of the Land by vesting. Agreeing terms and entering into the Acquisition Agreement does not displace the outcome that the Land will vest in the Minister by operation of statute and not by any actions of the Fund. Accordingly, we see no reason to depart from our views as expressed in GSTR 2006/9. As it is our view that a supply has not been made, the threshold for section 9-5 of the GST Act has not been met, and thus no taxable supply has been made. For the sake of completeness, we note that the Fund is not registered for GST and is not carrying on an enterprise. We do not consider the compulsory acquisition to be part of an enterprise carried out by the Fund because the compulsory acquisition was initiated by the Minister, not by the Fund. In other words, the Fund took no steps to develop, sell the Land, or otherwise deal with it in a commercial manner. It therefore stands to reason that regardless of whether a supply has been made, neither paragraphs 9-5(b) or (d) of the GST Act are satisfied, thereby also failing the test of whether a taxable supply had been made.