Private ruling: Goods and services tax (GST) and property subdivision
Date of advice: 25 January 2017
Published: July 2017

Ruling: Q1: Will GST be payable when you sell the proposed vacant block of land subdivided from your main residence, which is located in Australia? | A1: No. You will not be making a taxable supply of the proposed vacant block of land subdivided from your main residence under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because the sale of that block will be the mere realisation of a private, capital asset and hence, the sale will not be made in the course or furtherance of an enterprise that you carry on. Therefore, GST will not be payable when you sell the proposed vacant block subdivided from your main residence.

Relevant facts and circumstances: Individual X and individual Y (you) are not registered for GST. You purchased a property in Australia a number of years ago. The property is X square metres with an X bedroom single dwelling, which existed on the property at that time. You borrowed $X from a bank to finance the purchase. You have not acquired, and will not acquire additional land, to add to the original parcel of land. You purchased the property solely to use as your family residence and you have used it for that purpose for the duration of the time. You have not used the property, or allowed other entities to use the property, for a purpose other than using it as your families' residence. You erected a garden shed on the property. Due to financial hardship, you are subdividing the block into two, keeping your house and selling the vacant land to pay down debt. The subdivision will be a survey strata subdivision. Your consultant sought and obtained a rezoning of the property. You are not property developers and this is the only subdivision you have undertaken. You are not intending to carry on similar subdivisions in future. You have not obtained or sought DA approval to develop your property apart from the DA approval to do the subdivision. Work to be done in connection with the subdivision: ● You will do only the minimum development work that was required by the various authorities to secure approval to subdivide the property and meet their conditions for subdivision, such as water, power and land clearing to secure a new title with Planning Commission for the new block. ● Underground power must be laid. Any electrical work required as a condition of the subdivision will be carried out by the relevant electricity supplier. ● You will remove vegetation/trees as part of the conditions. ● A concrete cross over will be laid by an appropriate contractor. ● You will erect a retaining wall between your property and the proposed property (a condition of survey). ● The land will be levelled to create a new flat block level with the road. No new buildings will be erected as part of the subdivision project. The estimated cost of the subdivision is $X. Contractors will complete all works. You will not hire a manager to oversee or manage the development. You will liaise with contractors to complete the development. You will not borrow any money to finance the subdivision works. The property is not involved in any business. There will be no sales office on the new site. You will not claim tax deductions or tax credits for costs associated with the subdivision. You do not carry on any business, commercial activity, leasing activity or enterprise at some other location. You are in occupations not related to property development.

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 paragraph 9-5(a). | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(b). | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(c). | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(d). | A New Tax System (Goods and Services Tax) Act 1999 section 9-20.