GST applied to sales of vacant land by sheep grazing business

A company operating a sheep grazing business has been found liable for GST on the sales of vacant land, although the sales were unrelated to that activity. The AAT held the sales were taxable supplies under the GST Act and the company failed to prove that the sales were not made in the course or furtherance of its enterprise.

The taxpayer was a company operating a sheep grazing business that also held various rental properties. In 1962, it had acquired a parcel of land (parent lot) in Bergin Grove, San Remo, Victoria. It undertook various subdivisions of the parent lot and sold 12 lots between 1987 and 2019. In 2018, the company sold two lots of its vacant parent lot. The company recorded the land and relevant expenses in its financial records. It did not treat the two lots as trading stock, or claim input tax credits or tax deductions in relation to them.

In assessing the company’s net amount for the December 2018 quarterly tax period, the Commissioner treated the sales as taxable supplies, and included GST on the sales. The company’s position was that they were not taxable supplies and that in selling the land, it had as its sole objective of simplifying the company’s affairs and facilitation of winding up the deceased estates of relatives who previously held shares in the company. The sales, it argued, were not made in the course or furtherance of either its sheep grazing or rental property enterprise, or any other enterprise.

Although the AAT agreed the sales had no specific connection to either the company’s sheep grazing or rental property activities, it concluded the land was acquired for commercial purposes, there being no evidence to prove otherwise. It said that the company’s motivation to simplify its affairs and finalise the deceased estates was not inconsistent with acquiring the land for commercial gains. The evidence, or lack thereof, and the fact that the taxpayer was a company appeared to help the AAT reach this conclusion. Despite there being time gaps between the sale of subdivided lots, the AAT said that the sales of 12 lots of land over the period had a degree of repetition and scale, and the time gaps were not inconsistent with a form of business activity, prevailing market conditions being one explanation. The AAT said it was reasonable to infer that the selling of lots at an opportune time was contemplated when the land was acquired and the subdivisions carried out.

Although there was no positive evidence of this, the AAT gave more weight to there being no evidence to exclude a commercial explanation for the time gaps. The company failed to provide sufficient evidence to exclude a conclusion that the sale of the 12 lots was a series of activities in the form of a business.

Source: San Remo Heights Pty Ltd v FC of T 2020 ATC ¶10-552; [2020] AATA 4023, 9 October 2020.taxpayer