Private ruling: Goods and service tax (GST) and sale of land.
Published: June 2012

Ruling: Q1: Will GST be payable on your sale of the land? | A1: Yes. | Q2: Can you use the margin scheme to calculate GST on your sale of the land? | A2: You may use the margin scheme to calculate the GST payable on your sale of the land provided that, by the time of sale (or within such further period as the Commissioner allows), you and the purchaser agree in writing that the margin scheme will be used.

Relevant facts and circumstances: You are registered for GST. You are an Australian government entity. You intend to sell a vacant block of land to an adjoining land owner for a certain price. The land is of a certain area and is located in Australia. The land is situated in a developed residential area. You think that there was previously a plan to use the property as part of a certain type of project, but you are not sure. Based on the information available to us, it is clear that the land has, at some point, been cleared or partly cleared of trees/vegetation. While there is a tree or some trees on or around the land, the land is clearly different to the natural forest/bushland further down the street. The land appears to have grass coverage over much of it and has been mowed. You acquired the land before 1 July 2000. You have not used the land for any purpose during your period of ownership.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | 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 75-5 | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(1A) | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(3)

Reasons for decision: Summary: GST will be payable on your sale of the land as the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) will be satisfied. | Detailed Reasoning - Detailed reasoning: GST is payable where you make a taxable supply. You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states: You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that · you *carry on; and · the supply is *connected with Australia; and · 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. (*Denotes a term defined in section 195-1 of the GST Act) You will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act when you sell the land. This is because: · you will supply the land, by way of sale, for consideration · the supply will be in the course or furtherance of your enterprise · the supply of the land will be connected with Australia, as the land is located in Australia, and · you are registered for GST. There are no provisions in the GST Act under which your sale of the land will be GST-free or input taxed. Therefore, as all of the requirements of section 9-5 of the GST Act will be satisfied, you will make a taxable supply when you sell the land. Hence, GST will be payable on your sale of the land. | Summary: You may use the margin scheme to calculate the GST payable on your sale of the land provided that, by the time of sale (or within such further period as the Commissioner allows), you and the purchaser agree in writing that the margin scheme will be used, as: · you will make a taxable supply of real property by selling a freehold interest in land, and · you did not acquire the freehold interest through a supply that was ineligible for the margin scheme under subsection 75-5(3) of the GST Act. | Detailed Reasoning - Detailed reasoning: Section 75-5 of the GST Act sets out the requirements to be satisfied in order to use the margin scheme. Subsection 75-5(1) of the GST Act states: The *margin scheme applies in working out the amount of GST on a *taxable supply of *real property that you make by: (a) selling a freehold interest in land; or (b) selling a *stratum unit; or (c) granting or selling a *long term lease; if you and the *recipient of the supply have agreed in writing that the margin scheme is to apply. Subsection 75-5(1A) of the GST Act states: The agreement must be made: · on or before the making of the supply; or · within such further period as the Commissioner allows. Subsection 75-5(2) of the GST Act states: However, the *margin scheme does not apply if you acquired the entire freehold interest, *stratum unit or *long term lease through a supply that was *ineligible for the margin scheme. Subsection 75-5(3) of the GST Act sets out the circumstances when a supply is ineligible for the margin scheme. In your case, you will make a taxable supply or real property when you sell the freehold interest in land. Further, you did not acquire the freehold interest through a supply that was ineligible for the margin scheme under subsection 75-5(3) of the GST Act Therefore, you may use the margin scheme provided that you and the purchaser agree in writing that the margin scheme is to apply. The agreement to apply the margin scheme must be made on or before making the supply. If you enter into the margin scheme agreement after the sale, you will need to apply in writing to the Australian Taxation Office requesting it to consider allowing an extension of time. For further information, please refer to Goods and Services Tax Ruling GSTR 2006/7 Goods and services tax; how the margin scheme applies to a supply or real property made on or after 1 December 2005 that was acquired or held before 1 July 2000 . This ruling is available on our website at www.ato.gov.au

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.