Private ruling: GST - property demolishing and subdivision
Date of advice: 17 April 2026
Published: 29 June 2026
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: Dd MM YYYY

Ruling: Q1: Will the sale of the three lots of vacant land (the Lots) subdivided from address (Property 2) be a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999? | A1: No, there is a leasing enterprise (but no property development enterprise). You are not currently registered for GST as it does not conduct any other activities other than the leasing of Property 1. You are not required to be registered, and the sale of Property 2 is not a taxable supply. The sale of the Lots will be a disposal of a capital asset or substantially reducing the size or scale of your enterprise and therefore is not included in the calculation of your GST turnover (section 188-25).

Relevant facts and circumstances: You, the trustee for the Trust (Trust 1) was established on DD MM YYYY with a settlement fund of $XX. Pty Ltd (Company 1) is the trustee for Trust 1 with the Australian company number XX. (Taxpayer 1) and (Taxpayer 2) are the directors of Company 1. Trust 1 was established with the intention of investing in residential rental properties. You do not hold an Australian Business Number (ABN) and are not registered for goods and services tax (GST). Acquisition and Use of Property Assets Table 1:Trust 1 has purchased the following properties since it was established Property Address Property 1 Property 2 Date Acquired DD MM YYYY DD MM YYYY Settlement Date DD MM YYYY DD MM YYYY Acquired Price $XX $XX Land size XXm² XXm² Acquisition Method Multiple Loan facility agreements entered into by Taxpayer 1 and Taxpayer 2. Residential investment loan obtained on DD MM YYYY by Taxpayer 1 and Taxpayer from bank X for the loan amount of $X. Property Type Residential Residential Property Configuration X bedrooms, X bathrooms and X parking spaces. X bedrooms, X bathrooms and X parking spaces. Use of Property Leased to third-party tenants from DD MM YYYY, and is currently being leased Leased to third-party tenants from DD MM YYYY until DD MM YYYY Sale Date N/A N/A You engaged a real estate management agency and signed a XX-month fixed-term rental management agreement on DD MM YYYY for Property 2. Subdivision and Development Activities for Property 2 By late YYYY you started considering the development of multiple rental dwellings on Property 2 to create several rental income streams. This idea was influenced by media coverage of the Build-to-Rent (BTR) model and the concept of generating multiple income streams from a single property. The intention was to demolish the existing dwelling on Property 2, subdivide the land into XX lots and build new residential premises on each vacant lot to rent out. No formal quotes, development approvals, feasibility analysis, loan applications, or borrowing-capacity assessments were undertaken in relation to the construction of theXX new dwellings. Instead, you relied only on indicative construction and rental estimates from realestate.com.au and general online borrowing-capacity tools. You engaged the surveying company XX Surveying to assist with the development of Property 2. XX Surveying is a professional surveying business offering an end-to-end surveying solutions and they managed the entire land subdivision phase, which included submitting applications to the relevant authorities. A development application was lodged on your behalf by XX Surveying on DD MM YYYY with City of XX to subdivide Property 2 into XX lots, as shown below. Image: Subdivision of Property 2 Proposal Image provided Your development application was approved on DD MM YYYY On DD MM YYYY the tenancy rental agreement for Property 2 expired and the dwelling on Property 2 was subsequently demolished. You engaged XX for the demolition of Property 2 at the cost of $XX (inclusive of GST). The subdivision application was lodged with City of XX on DD MM YYYY. On DD MM YYYY, Property 2 was formally subdivided into XX blocks of vacant land. At no time, either before or during the subdivision process, did you have an intention to sell the Lots You did not claim any input tax credits on the subdivision process or on any other acquisitions in relation to Property 2. Post-Subdivision Intentions and Actions In early YYYY, you explored the possibility of commencing the process of constructing new dwellings on the three newly created vacant lots in line with the BTR concept. However, due to high interest rates and elevated building material costs following the impacts of COVID-19, you decided to postpone the development until market conditions returned to the predicted pre-COVID-19 levels. Throughout YYYY, YYYY and early YYYY, your research showed that the cost of building had not returned to pre-COVID-19 conditions and coupled with the high interest rates, it has become unrealistic to pursue the plan to build the three residential rental dwellings. You undertook minimal activities in relation to the subdivision of Property 2. The subdivision activities for Property 2 were funded by Taxpayer 1 and Taxpayer 2 in their own capacity via the relevant loan facility agreements. You have not untaken any marketing/advertising activities in relation to Property 2. Property 2 is not currently listed for sale nor have you received any off-market offers to purchase Property 2. No market valuations were obtained pre and post subdivision of Property 2. Contemporaneous data published by the Australian Bureau of Statistics on 19 November 2024 indicates that building costs have increased and have not returned to pre-COVID-19 levels. 1 XX News has reported that building costs have continued to increase, reflecting ongoing supply chain disruptions. 2 There is no intention to sell Property 1 at this stage. You will not undertake any further activities (both development and otherwise) in relation to Property 2 prior to the sale. Relevant Experience and Other Entities Taxpayer 1 and Taxpayer 2 have limited property development history and have been involved in the construction of XX rental property and XX main residential properties. Taxpayer 2 is an XX with property XX experience. A second trust, The Trustee forXX Trust was established in MM YYYY by mistake for cross-state investments; it has no ABN, no GST registration, and no income. Taxpayer 2 incorporated XX Pty Ltd, a property construction consulting company in MM YYYY, but business has not commenced (no ABN, no GST registration, no income).

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 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 40-35 | A New Tax System (Goods and Services Tax) Act 1999 section 188-10 | A New Tax System (Goods and Services Tax) Act 1999 section 188-15 | A New Tax System (Goods and Services Tax) Act 1999 section 188-20 | A New Tax System (Goods and Services Tax) Act 1999 section 188-25 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Detailed Reasoning - Detailed reasoning: In this ruling, • unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (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 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; and (d) you are registered or required to be registered for GST. However, the supply will not be a taxable supply to the extent the supply is GST-free or input taxed. Your supply of the Lots will satisfy subsection 9-5(a) and (c) as the supply will be for consideration and is connected with the indirect tax zone as the Lots are situated in Australia. The issue to be considered is whether the supply of Lots will be made in the course or furtherance of an enterprise that you carry on pursuant to subsection 9-5(b) and whether you are required to be registered for GST under section 23-5. | Detailed Reasoning - Enterprise: The term 'enterprise' is defined in subsection 9-20(1) and 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 ... The phrase 'carrying on' an enterprise is defined in section 195-1 to include 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. Paragraph 1 of 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? provides that the guidelines in MT 2006/1 are considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied upon for GST purposes. | Detailed Reasoning - In the form of a business: Paragraphs 177 to 179 of MT 2006/1 discuss the main indicators of carrying on a business, and states: Indicators of a business 177. To determine whether an activity, or series of activities, amounts to a business, the activity needs to be considered against the indicators of a business established by case law. 178. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are: • a significant commercial activity; • a purpose and intention of the taxpayer to engage in commercial activity; • an intention to make a profit from the activity; • the activity is or 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; • activity is systematic, organised and carried on in a businesslike manner and records are kept; • the activities are of a reasonable size and scale; • a business plan exists; • commercial sales of product; and • the entity has relevant knowledge or skill. 179. There is no single test to determine whether a business is being carried on. Paragraph 12 of TR 97/11 states that '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'. TR 97/11 can be referred to for a fuller discussion on whether a particular activity constitutes the carrying on of a business. Having regard to the facts of this case, we consider that your activities in relation to the demolition and subdivision of Property 2 do not demonstrate the indicators of a 'business' outlined above. In particular, the indicators set out in paragraph 178 of MT 2006/1 are not present to a sufficient extent to warrant a conclusion that you are carrying on an enterprise in the form of a business for the purposes of paragraph 9-20(1)(a). We will now consider whether your activities constitute an enterprise carried on in the form of an adventure or concern in the nature of trade, pursuant to paragraph 9-20(1)(b). | Detailed Reasoning - In the form of an adventure or concern in the nature of trade: 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. Paragraph 245 of MT 2006/1 refers to 'the badges of trade' which provides '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 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 includes: 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 Paragraph 258 to 261 of MT 2006/1 further considers the character of an asset and distinguishes between trade/revenue assets and capital/investment assets as follows: Trade v. investment assets 258. XX cases categorise assets as either trading assets or investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes. 259. Examples of investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of investment assets does not amount to trade. 260. Assets can change their character but cannot have a dual character at the same time. 261. Investment assets such as business plant and machinery are used by entities in carrying on a business. The purchase and disposal of those types of assets is ordinarily considered not to be an adventure or concern in the nature of trade for XX income tax purposes. Paragraph 262 of MT 2006/1 acknowledges that the question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions. Paragraph 263 continues, stating that the issue to be decided is whether the activities being conducted are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset. Paragraph 264 of MT 2006/1 discusses two seminal cases in this area: Statham & Anor v Federal Commissioner of Taxation 89 ATC 4070 ( Statham) and Casimaty v FC of T 97 ATC 5135 (Casimaty) . Paragraph 265 of MT 2006/1 extracts the key elements of both cases and provides a list of factors that can be used to assist in determining whether isolated property transactions are an adventure or concern in the nature of trade or a mere realisation of a capital asset: 265. From the Statham and Casimaty cases a list of factors can be ascertained that provide assistance in determining whether activities are a business or an adventure or concern in the nature of trade (a profit-making undertaking or scheme being the Australian equivalent, see paragraphs 233 to 242 of this Ruling). If several of these factors are present it may be an indication that a business or an adventure or concern in the nature of trade is being carried on. These factors are as follows: • 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 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. In addition to the above, paragraphs 266 and 267 of MT 2006/1 provides that there may be other relevant factors outside this list that need to be weighed up in reaching an overall conclusion and that no individual factor is determinative to the question of whether an enterprise is present. At the time you commenced the demolition and subdivision of Property 2, your clear intention was to construct residential rental properties to derive ongoing rental income. Property 2 was acquired in MM YYYY, and the subdivision was completed in MM YYYY. At no stage was Property 2 purchased with the intention of selling it to derive profit. Rather, your objective was to hold Property 2 (and subsequently the subdivided Lots) as a long-term income-producing asset, and the surrounding circumstances consistently support this intention. You retained ownership of Property 2 for approximately XX years, during which you actively sought an appropriate and financially viable opportunity to construct the proposed rental dwellings. It was not until YYYY that you considered disposing of the subdivided Lots. This decision arose only after it became apparent that construction of the XX new dwellings was no longer commercially viable. Importantly: • You will not undertake any further activities to enhance or market the Lots prior to sale • The Lots will be sold in their current condition, without additional development or improvements designed to maximise sale proceeds, • There was never an intention to derive a profit from the sale of the Lots, and • The Lots have not been used for any other purpose and will be kept vacant up until they are sold. Having regard to the circumstances, the proposed sale of the Lots does not amount to an isolated transaction or adventure or concern in the nature of trade pursuant to paragraph 9-20(1)(b). We will now consider whether your activities constitute an enterprise carried on a regular or continuous basis in the form of a lease, licence, or other grant of an interest in property, pursuant to paragraph 9-20(1)(c). | Detailed Reasoning - 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. In this case, you acquired Property 2 with the intention of leasing it as residential premises. Property 2 was in fact leased for a period of approximately XX year. During this time, you were making supplies of residential premises by way of lease on a regular and continuous basis. Accordingly, the leasing activity constitutes an enterprise pursuant to paragraph 9-20(1)(c). We therefore consider that you were carrying on a residential leasing enterprise in relation to Property 2, which is input taxed under section 40-35. Your intention to retain the redeveloped properties for leasing purposes only changed at a later point, when it became no longer financially viable to proceed with construction. This was due to external commercial factors, including persistently high construction costs and increasing interest rates. Although market forecasts had predicted that construction costs would return to pre-COVID-19 levels, this did not occur. In these circumstances, we consider that the demolition, subdivision, and the proposed sale of the Lots are activities done in the course or furtherance of the residential leasing enterprise you carried on in relation to Property 2. This includes activities undertaken in the course of substantially reducing or terminating that enterprise. | Detailed Reasoning - Registration: Section 23-5 states that you are required to be registered for GST if: (a) you are carrying on an enterprise; and (b) your GST turnover meets the registration turnover threshold (in your case the threshold is $XX). Note: It is the entity that carries on the enterprise that is required to be registered (and not the enterprise). As discussed previously, your activities associated with the demolition, subdivision, and subsequent proposed sale of the Lots fall within the scope of 'carrying on an enterprise' thus satisfying paragraph 23-5(a) above. The next issue to consider is whether your GST turnover meets the registration turnover threshold of $75,000 or more. Subsection 188-10(1) provides that you have a GST turnover that meets the registration turnover threshold if: (a) your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is less than $75,000; or (b) your projected GST turnover is at or above $75,000. Your 'current GST turnover' is defined in section 188-15 as the sum of the values of all of your supplies made in a particular month and the preceding 11 months. Your 'projected GST turnover' is defined in section 188-20 as the sum of the values of all of your supplies made in a particular month and the following 11 months. Paragraphs 188-15(1)(a) and 188-20(1)(a) provide that input taxed supplies are disregarded when calculating your current and projected turnovers respectively. As such, the rental proceeds generated from leasing Property 1 are not included in the calculation of your 'current GST turnover' or your 'projected GST turnover'. Section 188-25 provides that in calculating your projected GST turnover, you disregard any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours: In working out your projected GST turnover, disregard: (a) any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and (b) any supply made, or likely to be made, by you solely as a consequence of: (i). ceasing to carry on an enterprise; or (ii). substantially and permanently reducing the size or scale of an enterprise. Goods and Services Tax Ruling GSTR 2001/7: Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover (GSTR 2001/7) provides further explanation on what is meant by the term 'capital asset'. The GST Act does not define the term capital assets. Generally, the term 'capital assets' refers to those assets that make up the profit-yielding subject of an enterprise. They are often referred to as structural assets and may be described as the business entity, structure or organisation set up or established for the earning of profits. A revenue asset on the other hand, is an asset whose realisation is inherent in, or incidental to, the carrying on of a business. That is, if the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital nature even if such a disposal is an occasional or on-off transaction. The sale of the Lots constitutes either the disposal of a capital asset or an activity that substantially reduces the size or scale of your enterprise. As a result, the proceeds from the sale are excluded from the calculation of GST turnover pursuant to subsection 188-25. Your only other income is rental income derived from Property 1, which is an input taxed supply under Division 40. Accordingly, this income is excluded from GST turnover under paragraphs 188-15(1)(a) (current GST turnover) and 188-20(1)(a) (projected GST turnover). As you do not have a current or projected GST turnover that meets or exceeds the registration turnover threshold, paragraph 23-5(b) is not satisfied. Therefore, you are not required to be registered for GST. The taxation outcome for any future demolition and subdivision of your properties may be different from the outcome set out in this ruling, as it will depend on the specific facts and circumstances at that time. 1 Australian Bureau of Statistics, 'Home building through the pandemic ((19 November 2024) < https://www.abs.gov.au/articles/home-building-through-pandemic#construction-costs-increased >. 2 Emilia Terzon, 'Home building industry facing COVID-like price spikes due to Middle East war' ABC News(23 March 2026) < https://www.abc.net.au/news/2026-03-23/building-supply-chain-impact-and-shortages/106468234 >.