Private ruling: GST and sale of property
Date of advice: 24 March 2021
Published: June 2021
Ruling period: 1 January 20XX to month ending 30 December 20XX

Ruling: Q1: Is the sale by you (the Owners) to the purchaser of the subdivided land (Lot 2) a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. Section 9-5 of the GST Act provides that you make a taxable supply if: • you make the supply for consideration; • the supply is made in the course or furtherance of an enterprise that you carry on, • the supply is connected with the indirect tax zone (Australia); and • 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. In this case, it is accepted that the sale of the subdivided lot is not a supply that is made in the course or furtherance of an enterprise that you carry on. Consequently, the sale is not a taxable supply and is not subject to GST. Note, 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) provides the Commissioner' view on the meaning of on an enterprise. MT 2006/1 provides that assets can change their character from investment, which is capital in nature, to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. In particular attention is drawn to paragraph 251 of MT 2006/1 which states: 251. The greater the frequency of similar transactions the greater the likelihood of trade.

Relevant facts and circumstances: In the 19XX's Mr X and his then wife purchased a block of land (the Property) on which they constructed residential premises. Mr X and his then wife separated, however she remained in the house on the Property until the late XX's when Mr X and Ms Y acquired his former wife's interest in the Property. Mr X and Ms Y (together the Owners) have used the house on the Property as their marital home ever since their acquisition in the 19XX's and continue to do so as at the time of this private ruling request. Given the size of the land, the Owners decided to sell part of the Property by subdividing the block into two lots. Upon subdivision, lot 2 consisted of vacant land. No other development activity has been undertaken by the Owners on lot 2. The Owners and a purchaser entered into a contract of sale (Contract) for the subdivided block of land (Lot 2). Settlement under the Contract is expected shortly. The Owners are not registered for GST.

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