Private ruling: GST and subdivided land
Date of advice: 9 July 2015
Published: July 2015

Ruling: Q1: Will the sale of your vacant lots (the Property) be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax Act 1999 (GST Act)? | A1: No. The requirements of a taxable supply include that you are registered or required to be registered for GST. Under section 23-5 of the GST Act you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. You are a partnership carrying on a leasing enterprise. We do not consider your activities in relation to the subdivision of the Property and sale of the vacant lots amounts to an enterprise in their own right. The sale of the vacant lots constitutes the transfer of ownership of a capital asset for the purposes of section 188-25 of the GST Act and will be disregarded when calculating your GST turnover. As the value of the transfer of the vacant lots is excluded from the calculation of your GST turnover, you are not required to be registered pursuant to section 23-5 of the GST Act. Therefore, you are not making a taxable supply when you sell the vacant lots and GST will not be payable in respect of these sales.

Relevant facts and circumstances: Entity A and Entity B (You) have a joint interest in a number of lots (the Property). Neither entity is individually registered for GST. You were registered for goods and services tax (GST) as a partnership (Entity C) for a commercial leasing enterprise you carry on in relation to your farm (the Farm). You have cancelled this registration. There is a residential premise on the Farm that you let periodically. The rental income from the residential premise is not recorded with the rental income from the Farm. You also have rental income from other residences. In 19XX when you purchased the Property it was comprised of a number of individual lots with a house on one lot. Your intention at the time of purchase was to build a house on the remaining lots to increase their value and generate rental income. The house on the Property has been rented since purchase. Sometime after the purchase of the Property, the lots were amalgamated into one lot by the local government authority (LGA). From 20XX you engaged professionals to oversee the subdivision of the Property into a number of lots for the purpose of constructing houses as per your original plans. You have not developed the land beyond those changes necessary to secure LGA approval for the subdivision of the Property. You have used your own private funds to complete the subdivision. No buildings have been erected. You have not claimed input tax credits for these costs nor claimed income tax deductions. The two vacant lots have been marketed on the internet. You have found the subdivision process extremely onerous and prolonged. You now wish to liquidate these two lots rather than go ahead with your original intention of constructing rental properties on the lots.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act Section 9-5 | A New Tax System (Goods and Services Tax) Act Section 9-20 | A New Tax System (Goods and Services Tax) Act Section 9-40 | A New Tax System (Goods and Services Tax) Act Section 23-5, and | A New Tax System (Goods and Services Tax) Act Division 188.