Private ruling: GST and the sale of land
Date of advice: 11 January 2017
Published: June 2017

Ruling: Q1: Will your supplies of the individual lots at the Property be taxable supplies pursuant to section 9-5 of the GST Act? | A1: No, you are neither registered nor required to be registered for GST. Further, your sales will not be in the course of an enterprise that you carry on. Therefore, your supplies of the individual lots will not be taxable supplies pursuant to section 9-5 of the GST Act.

Relevant facts and circumstances: The arrangement that is subject of the private ruling is described below. This description is based on the relevant documents supplied. You are not registered for GST. You have never been associated with property subdivisions in the past. On ddmmyyyy, you purchased the property as joint tenants. The land area of the Property is X.XX hectares. You have resided in the dwelling located on the Property which was renovated after the Property was purchased. You have run your own cattle, and have agisted other people's animals on the Property. The properties surrounding the Property were largely rural residential lots used for small scale farming operations and lifestyle purposes when the Property was purchased. In yyyy, the shire council was amalgamated with two other councils to form the Council. In yyyy, the Council released the Planning Scheme which outlined that your property was capable of being subdivided into smaller lots of approximately one hectare with the aim of establishing new, lower density housing in the district. The Property is currently located in the Rural Residential Zone under the Planning Scheme. Due to the encroaching development in the area and its urbanisation, you have decided to sell the Property so that you can acquire a replacement lifestyle property in a more rural location for your personal use and enjoyment. It is your intention to subdivide the Property into smaller acreage lots. You began discussing the prospect of subdividing the Property in mmyyyy. In mmyyyy, you engaged the services of the Town Planners to prepare and lodge a development application for the reconfiguration of the Property into X subdivided lots. On ddmmyyyy, the Town Planners provided you with a fee proposal and scope of works for the subdivision of the Property. On ddmmyyyy, the Developers provided their proposed fees and scope of works. In mmyyyy, the Council indicated that the subdividing of the Property into eight subdivided lots was a possibility. On ddmmyyyy, you entered into a Consulting Services Agreement with the Developers to undertake the subdivision activities. The Consulting Services Agreement outlines that you would pay the Developers a fee for their services in relation to the subdivision of the Property. On ddmmyyyy, the Developers prepared preliminary engineering drawings for the proposed subdivision of the Property. On ddmmyyyy, the Surveyors prepared a drawing of the proposed subdivision of the Property. In mmyyyy, the Town Planner prepared a preliminary development application (the Preliminary Application) for the subdivision of the Property into X lots in accordance with the proposed subdivision drawing prepared by the Surveyors. On ddmmyyyy, the Town Planner lodged the Preliminary Application with the Council. On ddmmyyyy, the Council requested additional information in relation to the Preliminary Application. On ddmmyyyy, the Town Planners responded to the Council's request when they lodged a formal Development Application (DA) which outlines that: ● The proposed development would consist of X rural residential lots and one internal road providing access to the lots. The X lots will be created with road access off the Road ● The proposed development will comprise of the construction and/or installation of site earthworks and buildings, access driveways, stormwater drains, other ancillary services, and landscaping; and ● The dwelling and other buildings constructed on the Property will be located on Lot x after the subdivision occurs. The market value of the Property prior to the subdivision activities is estimated to be $xxx It is estimated that the total costs of subdividing the Property will be $xxx, excluding interest on loans. You expect to receive $xxx from the sale of the subdivided lots. You will fund the subdivision of the Property with $xxx received from the sale of other assets, borrowed funds and the proceeds from pre-sale of the subdivided lots. You will not undertake any physical activities in relation to the subdivision of the Property, other than provide assistance to the Town Planner and real estate agent as required. You will engage the services of a real estate agent to market and sell the lots once the subdivision is approved. You have not previously attempted to sell the Property as a whole. You have not undertaken any land subdivision and sale activities in the past and do not intend to undertake any similar activities in the future. It is anticipated that the DA approval will be received by ddmmyyyy, with the subdivision of the Property expected to occur within 12 months of the work being commenced, with commencement expected to occur by mmyyyy at the latest. For the purposes of this ruling: ● The subdivision of the Property will be undertaken in accordance with the approved DA; ● The Property will be subdivided into nine lots with the dwelling and buildings located on Lot x, and the other Lots being vacant land; ● You will engage the services of professionals to undertake the subdivision activities and will not undertake any activities yourselves other than providing assistance to the Town Planner; ● You will engage the services of a real estate agent to market and sell the Lots; and ● You have not previously engaged in the business of buying, subdividing and sale of land and do not intend undertaking any subdivision activities in the future.

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 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5