GST: Can vacant land be residential premises?

Vilder V Commissioner of Taxation

In Vidler v Commissioner of Taxation [2010] FCAFC 59 the Full Federal Court examined whether vacant land without living facilities which for town planning purposes is zoned residential premises, can be residential premises for the purposes of the New Tax System (Goods and Services Tax) Act) (GST Act).

Facts

Braith Vidler purchased land in Ipswich, Queensland in August 2004 for $1,000,000 and sold it in December 2004 for $2,350,000. The land consisted of 2.7 ha vacant land and was zoned residential low density. It was connected to electricity, but not to gas, water or sewerage although access to those services was available at the edge of the property

Vidler purchased another piece of land in Ipswich, Queensland in May 2004 for $175,000 and sold in April the following year for $285,900. While the land had access to electricity, water and sewerage none was connected.

GST was not paid in respect of either sale because Vidler took the view that the sales were input taxed as sales of residential premises. In 2006, the Commissioner issued notices of assessment of GST on each sale: $122,727 and $10,081 respectively. Vidler objected. Vidler's notices of objection were disallowed. The Administrative Appeals Tribunal (the Tribunal) affirmed the Commissioner's decisions on objection. Vidler's appeal to the Federal Court was dismissed 1. Vidler then appealed to the Full Federal Court.

Legislation

The question for both the Tribunal and the primary judge was whether vacant land is "residential premises" for the purposes of s 40-65(1) GST Act.

Section 40-65(1) GST Act in part provides:

"A sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of the occupation)." Residential Premises is defined in s 195-1 as:

"... land or building that: is occupied as a residence or for residential accommodation; or is intended to be occupied, and is capable of being occupied, as a residence or forresidential accommodation; (regardless of the term of the occupation or intended occupation) and includes a floating home." The Primary Judge

The question before Stone J (at first instance) was whether the two properties were "intended to be occupied, and [were] capable of being occupied, as a residence or for residential accommodation" within paragraph (b) of the definition of "Residential Premises". Stone J applied what she had said about paragraph (b) in South Steyne Hotel Pty Ltd v Federal Commissioner of Taxation 2(South Steyne).

"With these [dictionary] meanings in mind it is not difficult to see why the full court [in Marana Holdings...