Private ruling: GST and carrying on an enterprise
Published: November 2014

Ruling: Q1: Is the sale of the specified property 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 making a taxable supply include that the supply is made in the course or furtherance of an enterprise that you carry on and that you are registered or required to be registered for GST. We consider that you are not carrying on an 'enterprise' as defined in section 9-20 of the GST Act and you are neither registered nor required to be registered for GST in regard to your activities relating to the sale of the property.

Relevant facts and circumstances: You are not registered for GST. You hold a one-third interest in a specified property (Property). Your parent and sibling also each hold a one-third interest in the Property. The Property is approximately X hectares in size and has been in your family since the 1800's. There are currently a number of houses on the Property which are rented or occupied by family members. Your parent acquired the Property from their parent and had lived on the property until recently when they were unable to continue living on the Property due to health issues. You and your sibling purchased your interests in the Property around this time in an effort to financially assist your parent. The Property was used as a farm up until the early 1990's. The majority of the Property is vacant and is used for the private enjoyment of you and your extended family. Due to your parent's health and financial issues you intend to subdivide the Property into separate lots over a number of stages. It is your intention, and the intention of your sibling, to retain as much of the Property as possible in order to pass it down to the next generation of the family. The intention is to sell lots created from the initial stages to improve your parent's financial position and also fund the other stages of the development. The relevant council has approved the proposed subdivision. Subsequently, approval for operational works was granted. You (together with your parent and sibling): • have engaged a consultant engineer to project manage the sub-division and a real estate agent to sell the subdivided blocks • intend to borrow the funds to finance stage 1 of the sub-division • will not claim the interest incurred on the borrowed funds as a business expense (the interest will form a part of the cost base of the subdivided lots for capital gains tax purposes) • only complete the works required by council under the development approval, and • have never conducted any similar activities in the past. No buildings will be erected on the Property as part of the subdivision.

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 23-5, and | A New Tax System (Goods and Services Tax) Act 1999 Section 23-10.