Private ruling: GST and the sale of vacant land
Date of advice: 23 November 2018
Published: February 2019

Ruling: Q1: Is the sale of vacant land by you a taxable supply and therefore subject to GST? | A1: Yes, the sale of vacant land by you is a taxable supply and is subject to GST.

Relevant facts and circumstances: You are registered for the goods and services tax (GST). You carry on a business of other than selling real property. A few years ago you purchased vacant land (with no building on) (property). Your intention of purchasing the property was to use it to build a business premises. You have not claimed any input tax credits in relation to the property. You have not developed the land in any way or obtained any development approval for any subdivision of the property. Since purchasing the property, it has not been used to carry on any enterprise and has been left vacant without being put to any use. You intend to sell the property to a third party at arm’s length.

Relevant legislative provisions: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 | Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision: Summary: GST is payable on taxable supplies. A taxable supply is defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 as follows: 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 with the indirect tax zone ; and (d) you are * registered , or * required to be registered . However, the supply is not a * taxable supply to the extent that it is * GST-free or * input taxed . (terms marked with asterisks (*) are defined in section 195-1 of the GST Act) The supply meets paragraphs 9-5(a), 9-5(c), 9-5(d), as respectively, you make the supply for a sale price, the property is located in Australia, and you are registered for GST. The supply is also not input taxed or a GST-free supply. What needs to be determined in this case is whether or not you sold the property in the course or furtherance of your enterprise (i.e. paragraph 9-5(b)). You have contended that given that you carry on a business other than one that is selling real property that you do not meet paragraph 9-5(b). It is the Commissioners’ view that where an entity purchases property with the intention of using it to build a business premises, that this purchase was made in the course of its’ enterprise. Even though the purpose for which the property was purchased has changed, the property is still a capital asset owned by the entity which when disposed of is considered to be made in the course of its’ enterprise. Accordingly, the sale of the property is a taxable supply and is therefore subject to GST. | Detailed Reasoning - Input tax credits: You are entitled to claim input tax credits on creditable acquisitions that you make in relation to the property. A creditable acquisition is defined in section 11-5 of the GST Act as follows: You make a creditable acquisition if: (a) you acquire anything solely or partly for a * creditable purpose ; and (b) the supply of the thing to you is a * taxable supply ; and (c) you provide, or are liable to provide, * consideration for the supply; and (d) you are * registered , or * required to be registered . Based on the facts provided, it is not evident that you would’ve acquired anything for a non-creditable purpose as you did not carry on anything from the property other than hold the property for a number of years. And you also do not make any supplies that are input taxed. Accordingly, it is the Commissioners’ view that you are entitled to claim input tax credits on any of the creditable acquisitions that you have made (provided you hold valid tax invoices). However, there are time limits on GST credits and refunds. Please visit our website www.ato.gov.au or use the following link for further information on time limits on GST credits. https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Time-limits-on-GST-credits-and-refunds/