Tax Tip 176: Subdivision of Land and GST

Tax Tip 176: Subdivision of Land and GST


Many people would know that the transfer of residential land is not input taxed as there is no dwelling on the land and it therefore may amount to a taxable supply the supply is made for consideration and is made in the course of an ‘enterprise’.

This could mean that GST needs to be collected and remitted to the ATO.


However the ATO considers that the mere subdivision of land does not result in a ‘supply’. This is the case where ownership does not change.


Paragraph 50 of GSTR 2009/2.

Is the subdivision of land a supply?

50. The Commissioner considers that the subdivision of land by co-owners does not constitute a supply for the purposes of GST. All that results is that the subdivided land is held under different titles by the same owners. While the effect of the subdivision is to create new rights and titles in substitution of the original rights and titles, there is no change in the ownership of the subdivided land. Accordingly, where land is jointly held, a subdivision, by itself, does not involve a transfer of any interests in the land between the co-owners.


https://www.ato.gov.au/law/view/document?DocID=GST/GSTR20092/NAT/ATO/00001&PiT=99991231235958


Therefore the subdivision of land is not likely to attract GST.


However, where legal or beneficial ownership changes there may be a supply and this may result in GST being applicable.

An example is where X and Y jointly own a block of land and this land is subdivided into 2 lots with X solely owning lot 1 and Y solely owning lot 2.

 

GST also applies to a partition. Many subdivs contemplate a partition which can often... trigger a taxable supply between X and Y and between Y and X.

GSTR 2004/2 and GSTR 2009/2

 

Do X and Y need to pay stamp duty when they change ownership to solely owning each lot?

 

yes as a change of ownership will occur.

See how this could be avoided

Legal Tip 77: Joint Purchasers of Land and deeds of partition Legal Tip 77: Joint Purchasers of Land and deeds of partition

 

Thanks Terry.

I would like to confirm my understanding is correct after reading the tip. X and Y do not need to pay stamp duty if the value of each lot is 50%-50% of the original lot?

I also found similar information from Victoria's SRO website:
https://www.sro.vic.gov.au/sites/default/files/DA-017.pdf

 

I am not sure what you mean. If X ends up as owner of one block and Y ends up as owner of the other block then this would be a change of legal and beneficial ownership.

If X and Y partitioned the land at purchase then X was always the beneficial owner of just his block so no duty might be payable. depending on the circumstances/

 

Each state has marginally different partitioning rules. It requires legal advice