GST: Sale of land treated as an enterprise

The AAT has held that the sale of land by a taxpayer was subject to GST because it was a supply made in the course or furtherance of an enterprise carried on by the taxpayer.

The taxpayer purchased a 1.47-hectare historic landmark property (Sutton Farm) for $1.6m in 2013. He subsequently took steps, including engaging expert consultants, to have the land rezoned and subdivided, and completed electricity, water, and sewerage works. After the taxpayer sold Sutton Farm in 2021 for $4.25m, the Commissioner issued the taxpayer with a GST assessment on the basis that the sale of the property was a taxable supply for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The taxpayer objected to the assessment, claiming that the sale was not made in the course or furtherance of an enterprise carried on by him for the purposes of s 9-5(b) of the GST Act and, secondly, as Sutton Farm was his residential premises, the sale was an input taxed supply under s 40-65(1) of the GST Act. After his objection to the assessment was dismissed, the taxpayer sought review by the AAT, contending that it was not his intention to subdivide the property for commercial reasons. Rather, he wanted to live on the property with his family, including his son and daughter and had been told he would need to subdivide the property to enable them to build additional houses on the land.

The AAT upheld the Commissioner’s decision to constitute the series of activities undertaken by the taxpayer as an “enterprise”. The taxpayer’s development works were in “the form of a business” due to the scale of the operations that the taxpayer was involved in, including the re-zoning and subdividing of Sutton Farm, as well as the amount of capital invested by him in the purchase of the property and development works. This was regardless of whether he was in the business of being a property developer. The taxpayer’s activities could also be characterised as a series of activities “in the form of an adventure or concern in the nature of trade” under para (b) of the definition of “enterprise” in s 9-20(1) of the GST Act. The taxpayer satisfied that paragraph as he intended to profit from the sale of Sutton Farm although it was an isolated transaction. The supply of Sutton Farm was a taxable supply as all the elements of s 9-5 of the GST Act were satisfied.

Source: CCH Tax Week - Lance v FC of T [2024] AATA 11, 5 January 2024.