Private ruling: GST and sale of residential vacant land
Date of advice: 28 February 2020
Published: April 2020
Ruling period: 1 March 20XX - 31 December 20XX
Date scheme commenced: 1 March 20XX

Ruling: Q1: Is the sale of the subdivided vacant residential land at the property by xx a taxable supply in accordance with section 9-5 of a New Tax System (Goods and Services Tax) Act 1999 ("GST Act")? | A1: No - as not all the requirements under section 9-5 of the GST Act are met. | Q2: If the sale is a taxable supply, would the margin scheme be applicable to the sale of the subdivided vacant residential land at the property in accordance to Division 75 of a New Tax System (Goods and Services Tax) Act 1999 ("GST Act") | A2: No - the sale is not a taxable supply, the margin scheme is not applicable.

Relevant facts and circumstances: You are a director of a company whose enterprise is selling caravans and camper trailers. You are not registered for GST. You purchased an existing dwelling at 5 the property for $xx that was settled on xx. You are the sole owner of the property. The property was rented out till the time of demolition of the existing dwelling. Your intention was to build a house on the land for the purpose of making it your primary residence on completion. The town planning application was initially made for the construction of one dwelling. You thereafter amended the planning application to seek approval to construct two townhouses - one for yourself and one for your parents. The permit which included the drawings was granted by the local council in xx. The existing dwelling was demolished in xx and no other work has been carried out on the site. You and your associates have never had any experience in property construction in the property development industry. Due to cash flow issues and your concerns being inexperienced in property construction, you have now decided to sell the property. A copy of the original purchase contract for the property was provided by your tax agent on xx. On xx, your tax agent provided the following further information: · You have one other leasing residential property. · Your wife has 2 other leasing residential properties.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Section 9-20 | Section 9-40 | Section 23-5 | Paragraph 23-5(a) | Subsection 188-10(1) | Section 188-15 | Section 188-20 | Section 188-25 | Section 75-5

Reasons for decision: Summary: Section 9-5 of the GST Act states you make a taxable supply if (a) you make a supply for consideration and (b) it is in the course or furtherance of an enterprise that you carry on and (c) the supply is connected with the indirect tax zone (Australia) and (d) 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. Based on the facts you meet the requirements of section 9-5 (a) to (c) and the supply is not GST-free or input taxed. As you are not registered for GST, it needs to be determined in this case whether you are required to be registered. In order to be required to be registered we need to consider whether you GST turnover meets or does not exceed a turnover threshold (section 188-10 of the GST Act). From the information provided your current GST turnover does not meet the GST turnover threshold (section 188-15 of the GST Act) and when considering your projected GST turnover, a supply made by transfer of capital assets are excluded (section 188-20 of the GST Act). Therefore your projected turnover would not meet the GST turnover threshold. Therefore, you are not required to be registered for GST. Consequently, as you do not satisfy all the elements in section 9-5 of the GST, the sale of the subdivided vacant residential land at the property will not be a taxable supply. Furthermore, under subsection 75-5(1) of the GST Act, the margin scheme will not apply as you are not making a taxable supply on the property. | Detailed Reasoning - Detailed Reasoning: The disposal of the two vacant residential lots will be treated as a capital asset as they are not considered part of your leasing enterprise. Under section 188-25 of A New Tax System (Goods and Services Tax) Act 1999, the value of this supply does not form part of calculating your GST turnover for the purposes of GST registration. This means that your turnover will not meet the registration threshold so you will not be required to register for GST. As you are not registered or required to be registered for GST no taxable supply is made and therefore, the margin scheme will not be applicable to you. However, in the future if you carry on a similar type of activity we may consider that you are carrying an enterprise.