Issue
Is the entity, a property developer, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells vacant residential land?
Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells vacant residential land.
Facts
The entity is the seller of vacant residential land. The entity is registered for goods and services tax (GST) and is selling the vacant residential land in the course or furtherance of its enterprise. The supply is made for consideration and is connected with Australia.
Reasons for Decision
GST is payable on taxable supplies. Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes a supply for consideration; • it makes the supply in the course or furtherance of an enterprise that the entity is carrying on; • the supply is connected with Australia; and • the entity is registered or required to be registered.
However, the supply is not a taxable supply to the extent that the supply is GST-free or input taxed.
In this case, the supply satisfies all of the positive elements of section 9-5 of the GST Act and is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells the vacant residential land. [NOTE: As the entity is making a taxable supply when it sells the vacant residential land it will be liable for one-eleventh of the GST-inclusive sales price. However, the entity may choose to apply the margin scheme under Division 75 of the GST Act, in which case it will only be liable for one-eleventh of the margin.
It is irrelevant whether the property vendor sells the vacant residential land to a private purchaser or to an investor].