Private ruling: GST and sale of a capital asset
Date of advice: 7 August 2020
Published: September 2020

Ruling: Q1: Is the supply of the three properties (Lot 1, Lot 2 and Lot 3) by the Owners a taxable supply? | A1: No. In relation to the three properties (Lot 1, Lot 2 and Lot 3) we consider that they are the sale of capital asset by the Owners and therefore, the sales of these properties are disregarded. As the Owners are not registered or required to be registered for GST the supply of Lots 1, Lot 2 and Lot 3 will not meet the requirements of a taxable supply.

Relevant facts and circumstances: You and your spouse, together 'the Owners' purchased a block of land in a relevant regional state. At the time of purchase this property consisted of vacant land. The settlement of the property was in early 2015. Neither Owner is registered for GST. The land is in a low-density residential zone on which the Owners built a house which was their primary place of residence up till early 2020. At the time the Owners acquired and constructed the property they had no intention to subdivide. The Owners where in contact with the builder since 2015, and due to existing easements needed planning permits to build their residence on the property. The contract for construction of the house was signed in late 2015 and construction commenced in early 2016. In addition to the residence the Owners also constructed a shed. The house and shed were completed, and the Owners subsequently moved into the premises. The Owners enrolled the services of a surveyor to assess the possibility of subdividing the land into six blocks. Discussions and contemplation for the subdivision commenced in early 2016 and the Owners applied to the council for a subdivision planning permit which was issued three years later. For personal reasons three of the subdivided lots are now listed for sale. One consists of the residential premises that where constructed and the remaining two are vacant lots. The Owners are retaining the remaining three blocks and may return to the suburb in the future. Selling the house and two adjoining blocks would cover the costs and any losses. The Owners have not previously carried out any real estate development business or subdivisions.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 9-5 | A New Tax System (Goods and Services Tax) Act 1999 23-5 | A New Tax System (Goods and Services Tax) Act 1999 188-10 | A New Tax System (Goods and Services Tax) Act 1999 188-25