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Supply of land not a going concern

The following case involved the sale of a piece of land for which the taxpayer was trying to claim the going concern exemption from GST, despite having ceased development on it.

A sale of an “enterprise” (including a land development) can be GST-free if the requirements for the going concern exemption are met.
One of these requirements is that the taxpayer selling (or otherwise “supplying”) the enterprise must carry it on right up until the date it is sold.

Facts of the case

The taxpayer purchased land at Hope Island, Queensland, to develop as a retirement community. However, a number of years later it was decided that the taxpayer would withdraw from the project, and it ceased all construction works, removed existing construction works and all services to the apartment and house sites. Another purchaser was found which proposed to develop a residential development according to its own designs, plans and subdivisional approvals.

It had no need of or use for the taxpayer’s architectural plans and drawings, but still wanted to retain some of the features of the taxpayer’s original development, being the lakes, the marina and the canal. Bulk earthworks were required to enable those features to be developed or completed and, in that sense, the taxpayer continued those works.

The decision

The court held that the seller was not, at the date of the contract, carrying on an enterprise, but had abandoned the project in favour of simply selling the land upon particular terms. Other obligations to finish off bulk earthworks were simply an incident of that sale, so it was not a supply of a going concern, but was a taxable supply.
However, it would have been more likely to be a supply of a going concern if the taxpayer had assigned to the purchaser the drawings and plans together with the benefit of all contracts with end buyers off-the-plan, and had otherwise supplied all things necessary to continue the project enterprise and carried it on until settlement or the day of supply.

Cathy-Braun

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