Private ruling: Taxable supply and subdivision
Date of advice: 18 July 2025
Published: 15 September 2025
Ruling period: DDMMYYYY
Date scheme commenced: DDMMYYYY

Ruling: Q1: Did you make a taxable supply on the sale of the property situated at address (Unit 1) in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No

Relevant facts and circumstances: Acquisition of the Property You purchased the property situated at address (the Property) on DDMMYYYY for $XX The Property title details at the time of purchase was Volume number Folio number. The land of the Property measures at number square metres. The land of the Property is zoned neighbourhood residential which has not changed during your ownership period. You purchased the Property initially to be your principal place of residence and it was used for private purposes up until YYYY. Since YYYY, the Property has been treated as an investment property used to earn ongoing assessable rental income. As you developed a medical condition, your son (name) and other family members assist with your care. (name) was appointed as your administrator and guardian as part of a Victorian Civil and Administrative Tribunal (VCAT) order Details of your current VCAT order On DDMMYYYY, a VCAT orders that: • (name) address is appointed guardian for (name) • The guardian has the power to make decisions about these personal matters: - where (name) lives • Guardians must comply with the Guardianship and Administration Act 2019, which outlines their powers and duties. VCAT makes this decision because it is satisfied that: • due to a disability, (name) does not have capacity to make decisions about the personal matters listed in this order • (name) needs a guardian, considering the factors set out in section 31 of the Act, including their will and preferences (what's important to them) • this guardianship order will promote the personal and social wellbeing of (name) The VCAT order states: • the administrator has requested advice from VCAT relating to his powers and duties as administrator under the VCAT order dated DDMMYYYY. The advice requested specifically relates to approval for the development of a property held by the represented person. • VCAT gives the following advice: • VCAT approves the administrator's proposal to subdivide and develop the property of the represented person situated at address as follows. • The subdivision of the property into two lots, with one lot to be sold. • The development of the remaining lot by constructing a purpose built home for the represented Property subdivision and development Prior to the development, you lived at address as your principal place of residence. However, this location became unsuitable due to your health and care needs. Your guardian had to drive over an hour each way daily to assist you. The development of the Property was specifically undertaken to allow you to live closer to family support. The subdivision of the Property was initiated by your administrator/guardian due to your health and personal circumstances as outlined in your VCAT order. You did not borrow any funds to finance the subdivision and the construction costs. The entire subdivision and development were funded by you using your personal funds. The subdivision of the Property would comprise of: • Unit 1, land size of number square metres • Unit 2, land size of number square metres. Your administrator/guardian conducted the following activities on your behalf: • obtained a market valuation of the Property on DDMMYYYY, which advised the value of the land of Unit 1 post-subdivision was $XX • established the market value of the land prior to subdivision was assessed at $XX, as per the YYYY Land Tax Assessment Notice issued by the State Revenue Office • obtained a planning permission permit from the council to subdivide the Property, and construct two new double story townhouses • engaged a surveying firm to conduct land surveys and prepare the subdivision plans • subdivided the Property into two lots and removed vegetation, generally in accordance with the endorsed plans submitted to the council • demolished the dwelling on the original Property • engaged a project manager to organise the development including the planning, building and engineering assessments and drawings • engaged a construction company to build the new townhouses on Unit 1 and Unit 2 • engaged a legal firm to handle all the legal aspects including the title changes and contracts. You did not receive any capital proceeds from the demolition of the dwelling. The two townhouses were constructed simultaneously for reasons of cost-efficiency, builder availability, and compliance with the planning permit. Constructing both townhouses at once avoided the need for a Section 173 Agreement ( Planning and Environment Act 1987 (the Act)), which would have introduced further delays, legal costs, and procedural complexity. It was also more practical to complete both dwellings together during a time of widespread disruption and builder shortages due to COVID. The breakdown of the cost associated with the subdivision and construction are as follows: • Surveying services at $XX inclusive of GST • Subdivision application and permit and council payment at $XX inclusive of GST • Construction costs at $XX inclusive of GST. The total construction costs inclusive of professional works of the new dwellings being Unit 1 and Unit 2 were $XX. This was the first subdivision activity, or land development project that you have ever been involved in, and you have no plans for future subdivision activities or land development projects. No business plans, economic modelling or detailed financial projections were prepared however the following documents were calculated: • Budget Estimates - High-level cost estimates for subdivision and construction, including expenses related to planning/ building approvals, professional services, and building costs • Projected Cash Flow - Anticipated funding sources, including proceeds from the sale of one townhouse and personal finances, along with expected expenditure timelines • Construction & Development Costs - Quotes and invoices from professionals and contractors involved in the subdivision and building process • Personal Financial Planning - Internal assessments of affordability and financial feasibility to ensure the project remains viable. An administrator for a represented person (being you) is required by law to submit an Accounts by Administrator (ABA) reports each year with your financial affairs. An ABA is a report about the finances of the represented person who is the subject of a VACT administration order. The administrator must submit the ABA to VCAT to ensure the represented persons finances are well managed. The above listed records were calculated for the purpose of meeting this requirement. VCAT was fully informed of the development intentions and was aware that the proposed outcome included selling Unit 1 with a completed townhouse, and not just the land. The application to VCAT, and the subsequent order, were always based on constructing two dwellings, retaining one for your long-term use (Unit 2), and selling the other (Unit 1) to contribute towards funding the development. VCAT consented to this overall arrangement and were provided oversight of the financial implications, ensuring the project was in your best interest. Sale of the townhouse The intention was to sell one of the two new townhouses to your grandchild to help recoup a portion of the development cost and allow you to live closer to family who provide you care and support due to your medical condition. Unit 2 was specifically designed to accommodate your needs, particularly in managing your medical condition. You retained Unit 2 as your main residence. On DDMMYYYY you entered into a contract to sell Unit 1 for $XX inclusive of GST to your grandchild. A XX% deposit of the contract price was paid when the contract was signed, and prior to the commencement of the construction works. The sale price of $XX was based on the land value of Unit 1 obtained in the market valuation, in addition to half of the incurred build cost of $XX. Unit 1 was sold through a private sale to your grandchild as he assists with the care being provided to you by your family. The sale was private to avoid additional legal and marketing cost associated with preparing section 173 Agreements, as well as advertising costs. Unit 1 was sold off-the-plan before construction commenced. This decision was made to provide some financial certainty from the outset and to ensure that, upon completion, there would be funds available to offset the substantial construction costs funded by you. No funds were contributed by your grandchild during construction. Construction of Unit 1 and Unit 2 were completed around DDMMYYYY. Settlement for the sale of Unit 1 occurred on DDMMYYYY. The remaining XX% of the contract price was paid in full upon completion of Unit 1. No GST was withheld or remitted for the sale of Unit 1. The floorplan for Unit 1 and Unit 2 (was provided). Registrations Your Australian Business Number (ABN) is number. You registered for GST from DDMMYYYY in relation to the leasing of a commercial investment property situated at address (the Commercial Property). The Commercial Property was sold on DDMMYYYY and does not form part of this private ruling request. The GST registration remains active in respect of the commercial property leasing enterprise.

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 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Division 23-5 | A New Tax System (Goods and Services Tax) Act 1999 Division 38 | A New Tax System (Goods and Services Tax) Act 1999 Division 40 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: No, the sale of Unit 1 was not made in the course or furtherance of an enterprise that you carry on. Therefore, the sale was not a taxable supply under section 9-5 of the GST Act and GST was not applicable to the sale. | Detailed Reasoning - Detailed reasoning: In this ruling, • unless otherwise stated, all legislative references are to the GST Act • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act. • all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au | Detailed Reasoning - Taxable Supply: Section 9-40 provides that an entity is liable for GST on any taxable supplies that it makes. Section 9-5 provides that you make a taxable supply if: (a) you make the 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 to the indirect tax zone (Australia); and (d) you are registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Division 38 and 40 provides for certain supplies to be GST-free and input-taxed respectively. There are no provisions of the GST Act under which your sale of the property in question is GST-free. We need to consider whether the supply of the property will be input taxed. | Detailed Reasoning - New residential premises: Section 40-65 of the GST Act provides that the sale of real property (residential premises) is input taxed. However, the sale of residential premises is not input taxed to the extent that the residential premises are new residential premises. Real property is new residential premises in subsection 40-75(1)(c) if it has residential premises that have been built, or contain a building that has been built, to replace demolished premises on the same land. However, subsection 40-75(2)(c) provides that a residential premises is not new residential premises if, for the period of at least 5 years since the premises were last built, the premises have only been used for making supplies that are input taxed by way of lease, hire or licence under subsection 40-35(1)(a). The circumstances in which residential premises are considered 'new residential premises' is also discussed in Goods and Services Tax Ruling GSTR 2003/3: Goods and services tax: when is a sale of real property a sale of new residential premises? The construction of the townhouses on the Property were to replace the original dwelling on the land, the townhouse situated at Unit 1 has not been previously sold as residential premises and has not been leased for a period of at least 5 years, therefore Unit 1 is new residential premises pursuant to section 40-75(1) and its sale will not be input taxed. The requirements of paragraphs 9-5(a), 9-(c) and 9-5(d) are satisfied since: • On DDMMYYYY, a sales contract was exchanged between you and your relatives to sell Unit 1 for consideration of $XX • The sale of Unit 1 is connected with the indirect tax zone as it is located in Australia, and • You were registered for GST at the time of sale in relation to the leasing enterprise you carried on. We will now need to consider whether the sale was made in the course or furtherance of the leasing enterprise or any other enterprise that you carried on (section 9-5(b) of the GST Act). | Detailed Reasoning - Enterprise: The term 'enterprise' is defined in section 9-20 of the GST Act. Subsection 9-20(1) states: An enterprise is an activity, or series of activities, done: (a) in the form of a business; or (b) in the form of an adventure or concern in the nature of trade; or (c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or ... Section 9-20(2)(c) of the GST Act provides that an enterprise does not include an activity or series of activities by an individual with no expectation of profit or gain. Section 195-1 of the GST Act states that the phrase 'carrying on' in the context of an enterprise includes 'doing anything in the course of the commencement or termination of the enterprise'. This definition ensures that activities done in the course of the commencement or termination of the enterprise are included in determining whether the activities of the entity amount to an enterprise. Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number (MT 2006/1) contains the Commissioner's view on what constitutes an enterprise for the purpose of eligibility for an Australian business number. Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? (GSTD 2006/6) extends the application of MT 2006/1 to the GST Act. The principles in MT 2006/1 apply equally to the term enterprise and can be relied upon for GST purposes. On a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property Paragraphs 303 to 322 of MT 2006/1 discuss activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. Goods and Services Tax Determination GSTD 2000/9 Goods and services tax: if you let out residential premises do you need to get an ABN for PAYG purposes or register for GST? explains at paragraph 7 that the letting of a property is an activity in the nature of a lease, licence or other grant of an interest in property. If it is done on a regular and continuous basis, the activity will meet the definition of enterprise. The leasing of a property (whether commercial or residential property) will fall within the scope of an 'enterprise' for GST purposes. This is the case regardless of the fact that proceeds generated from the rental of residential premises are not subject to GST. Furthermore, the activities associated with the commencement or termination of a leasing enterprise will also fall within the scope of an enterprise for GST purposes. An enterprise terminates when the activities related to that enterprise cease. Paragraph 140 to 148 of MT2006/1 provides guidance on the termination of an enterprise. Ordinarily, the termination of an enterprise occurs when all assets are disposed of or converted to another purpose or use and all obligations are satisfied. A change in purpose could occur where an asset is no longer used by the entity in the enterprise and is instead used for private purposes. In your case you leased the Commercial Property on a regular and continuous basis until it was sold in DDMMYYYY. You registered for GST in relation to this leasing enterprise and remain registered for GST. You also leased the Property on a regular and continuous basis from DDMMYYYY until approximately DDMMYYYY. Therefore, we consider that you were also carrying on a leasing enterprise in relation to the Property prior to its subdivision and development. We consider that your leasing enterprise in relation to the Property ceased when you demolished the existing residence and converted the use of the Property to another purpose or use unrelated to leasing. We therefore do not consider that the subsequent subdivision, construction and sale of Unit 1 to your grandchild was done in the course or furtherance (which includes the termination) of the leasing enterprise that you carried on in relation to the Property or the Commercial Property. It remains to be determined whether the activities associated with the subdivision of the Property, construction and subsequent sale of Unit 1 were undertaken in relation to another enterprise that you carried on. In the form of a business Paragraphs 159 - 160 of MT 2006/1 include the following guidelines: 159. Whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case. 160. It is important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. This is because one activity may not amount to an enterprise but that activity taken into account with other activities may form an enterprise. All activities need to be taken into account including activities from the commencement to the termination of the enterprise. For further information on commencement and termination activities, see paragraphs 120 to 148 of this Ruling. Paragraphs 178 of MT 2006/1 discusses the main indicators of carrying on a business. Based on that discussion some of the indicators are: • a significant commercial activity; • purpose and intention of the taxpayer to engage in commercial activity; • an intention to make a profit from the activity; • the activity will be profitable; • the recurrent or regular nature of the activity; • the activity is carried on in a similar manner to that of other businesses in the same or similar trade; • the activity is systematic, organised and carried on in a business-like manner and records are kept; • the activities are of a reasonable size and scale; • a business plan exists; • commercial sales of products; and • the entity has relevant knowledge or skill. Paragraph 179 of MT 2006/1 provides that there is no single test to determine whether a business is being carried on. Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators. Overall, the facts of this case suggest that the indicators set out in paragraph 178 of MT 2006/1 are not present to a sufficient degree to warrant the conclusion that you are carrying on an enterprise in the form of a business. We consider that the activities you have undertaken to subdivide, develop and sell Unit 1 to your grandchild do not display the salient indicators of a business which are, amongst other things, transactions entered into a continuous and repetitive basis. In the form of an adventure or concern in the nature of trade Paragraph 234 of MT 2006/1 distinguishes between activities done in the form of a 'business' and those done in the form of 'an adventure or concern in the nature of trade'. This paragraph provides that: • a business encompasses 'trade engaged in, on a regular or continuous basis' • an adventure or concern in the nature of trade includes 'an isolated or one-off transaction that does not amount to a business, but which has the characteristics of a business deal'. Paragraph 237 of MT 2006/1 states: 237. The term 'profit making undertaking or scheme' like the term 'an adventure or concern in the nature of trade' concerns transactions of a commercial nature which are entered into for profit-making, but are not part of the activities of an on-going business. Both terms require the features of a business deal, See McClelland v Federal Commissioner of Taxation , in which Lord Donovan, delivering the opinion of the majority said: It seems to their Lordships that an 'undertaking or scheme' to produce this result must - at any rate where the transaction is one of acquisition and resale - exhibit features which give it the character of a business deal. It is true that the word 'business' does not appear in the section; but given the premise that the profit produced has to be income in its character their Lordships think the notion of business is implicit in the words 'undertaking or scheme'. Paragraph 244 of MT 2006/1 explains that an adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car and other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature. Paragraph 245 of MT 2006/1 refers to 'the badges of trade' which provides a 'common sense guidance' in reaching a conclusion on whether a transaction has the characteristics of a business deal and whether an asset is held as a trading/revenue asset or a capital/investment asset held for either investment or personal enjoyment. While an activity such as the selling of an asset may not of itself amount to an enterprise, account should be taken of the other activities leading up to the sale to determine if an enterprise is carried on. The Commissioner's view on the badges of trade in MT 2006/1 is as follows: The subject matter of realisation 247. This badge of trade considers the form and the quantity of property acquired. If the property provides either an income or personal enjoyment to the owner it is more likely to be an investment than a trading asset... The length of period of ownership 249. A trading asset is generally dealt with or traded within a short time after acquisition... The frequency or number of similar transactions 251. The greater the frequency of similar transactions the greater the likelihood of trade. Supplementary work on or in connection with the property realised 252. Improving property beyond preparing an asset for sale, to bring it into a more marketable condition and gain a better price suggests an element of trade. The circumstances that were responsible for the realisation 253. Trade involves operations of a commercial character. As assets can be sold for reasons other than trade, the circumstances behind the sale need to be considered. For example, a quick resale may have occurred as a result of sudden financial difficulties. Motive 254. If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant. It is relevant in those cases where the evidence is not conclusive. An intention to resell at the time of acquisition may be an indicator of the resale being an adventure or concern in the nature of trade. 255. Motive is also important in cases if there is a change in character of the asset. For example, a trading asset becoming an investment asset when the person decides to keep the asset, either for income producing purposes or personal enjoyment. Paragraphs 262 to 302 of MT 2006/1 specifically consider isolated transactions and sales of real property. Paragraph 263 of MT 2006/1 provides that the issue to be decided is whether these activities are of a revenue nature (that is, have the characteristics of a business deal) and therefore an enterprise. Where they are not of a revenue nature, then the transaction could be a mere realisation of a capital asset. The activities which are a mere realisation of a capital/investment asset are not a business or an adventure or concern in the nature of trade and therefore no enterprise is being carried out. Paragraph 265 of MT 2006/1 outlines some factors which could determine whether or not the activity is done in the form of a business or in the form of an adventure or concern in the nature of trade. They are: • there is a change of purpose for which the land is held; • additional land is acquired to be added to the original parcel of land; • the parcel of land is brought into account as a business asset; • there is a coherent plan for the subdivision of the land; • there is a business organisation - for example a manager, office and letterhead; • borrowed funds financed the acquisition or subdivision; • interest on money borrowed to defray subdivisional costs was claimed as a business expense; • there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and • buildings have been erected on the land. | Detailed Reasoning - Conclusion: You purchased the Property on DDMMYYYY for $XX with an existing dwelling. The Property was used as your main residence up until DDMMYYYY, when you leased the property. The Property generated rental income during the periods it was leased from YYYY until YYYY when your guardian/administrator initiated the subdivision of the Property. It had been approximately number years since you purchased the Property, before you applied for a planning permit in YYYY to have the dwelling demolished and the land subdivided. Due to your declining health a decision was made by your guardian/administrator, with the prior approval/consent of VCAT, to subdivide and develop the Property for the primary purpose of constructing a purpose- built home to accommodate your needs. A special purpose build townhouse was constructed on Unit 2, which you currently retain as your principal place of residence. A townhouse was also constructed on Unit 1 and sold to your grandchild to be occupied as his principal place of residence. This arrangement was made to support your need to reside close to your family members who assist with your ongoing care. Furthermore, the sale of Unit 1 to your grandchild allowed you to recoup some of the costs associated with the subdivision/development of the Property and was not done with the intention of making a profit. The sale price of Unit 1 was calculated to reflect the cost of construction and market value of the land. The overall subdivision was not profit driven and lacks commercial flavour. You had no intention to engage in business but rather enter into a family arrangement intended to meet your personal care needs and facilitate proximity to family members providing support. Whilst the building of the townhouse on the subdivided lots is beyond that necessary to secure council approval for the subdivision of the land, this was done because of the aforementioned family reasons/arrangement. It was also overall beneficial to your family to construct the two dwellings simultaneously for the following reasons; cost-efficiency, builder availability, and compliance with the planning permit. Constructing both townhouses at once avoided the need for a Section 173 Agreement, which would have introduced further delays, legal costs, and procedural complexity. It was also more practical to complete both dwellings together during a time of widespread disruption and builder shortages due to COVID. No additional land was purchased to add to the original parcel of land. You have never undertaken any business of buying and selling land or property development in the past and you have no plans for future subdivision activities or land development projects. The development and sale of Unit 1 is an isolated transaction. Whilst there appears to be a coherent plan for the subdivision and development of the Property and you maintained substantial financial records, these were required as part of the VCAT order. The VCAT order requires your administrator to provide ABA reports each year detailing the financial management of your affairs. You did not borrow any funds to finance the subdivision and the construction of the townhouses. The entire subdivision and development were funded through your personal funds. You did not receive any capital proceeds from the demolition of the original dwelling on the Property. On balance having considered the facts of the case against the badges of trade and other factors listed above, we consider the activities you have undertaken in the subdivision, development, and sale of Unit 1 do not amount to an enterprise for GST purposes under subsection 9-20(1). From the information provided there is no evidence to indicate that you constructed Unit 1 with the intention to make a profit. Your primary motivation for carrying out the development was to facilitate a living arrangement in which your grandchild could reside nearby and assist with your care. The activities were not undertaken with a view of making a profit. We consider your disposal of Unit 1 to be a mere realisation of a capital asset. Accordingly, the requirement specified in paragraph 9-5(b) is not satisfied and your supply of Unit 1 will not meet all the requirements of section 9-5 to be a taxable supply. As such GST is not applicable to the sale.