VZFS and Commissioner of Taxation (Taxation)
[2025] ARTA 2013
•7 October 2025
VZFS and Commissioner of Taxation (Taxation) [2025] ARTA 2013 (7 October 2025)
Applicant: VZFS
Respondent: Commissioner of Taxation
Tribunal Numbers: 2023/8626, 2023/8627, 2023/8628, 2023/8629, 2024/10075, 2024/10076, 2024/10077
Tribunal:Senior Member R Olding
Place:Adelaide
Date:07 October 2025
Decision:The Tribunal affirms the decisions under review.
................[Sgnd]............................................
[Senior Member Olding]
Catchwords
TAXATION – GOODS AND SERVICES TAX – where applicant’s family owned farming land for generations – where land subdivided and sold – where developer responsible for obtaining rezoning and development approvals, carrying out development works and marketing subdivided lots – where subdivided lots sold by applicant to purchasers – where applicant and developer shared proceeds of sales – whether sales made in course of applicant carrying on an enterprise – decision affirmed
Legislation
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-5(b), 9-20(1)
Income Tax Assessment Act 1997 (Cth, s 15-15Cases
ATS Pacific Pty Ltd v Federal Commissioner of Taxation
(2014) 219 FCR 302
Commissioner of Taxation v Swansea Services Pty Ltd[2009] FCA 402
Commissioner of Taxation v Whitford’s Beach Pty Ltd(1982) 150 CLR 355
Ghali v Chief Commissioner of State Revenue[2013] NSWCA 340
Greig v Federal Commissioner of Taxation(2020) 275 FCR 445
Hance v Commissioner of Taxation[2008] FCAFC 196
Morton v Commissioner of Taxation[2025] FCA 336
Nerang Subdivision Pty Ltd & Ors v Hutson & Anor[2023] QSC 268
Toyoma Pty Ltd v Landmark Building Developments Pty Ltd[2006] NSWSC 83
Statement of Reasons
WHAT IS THIS CASE ABOUT?
This case concerns whether the applicant is liable for GST on sales of subdivided land. The answer to that question turns mainly on whether the sales were made in the course or furtherance of an enterprise carried on by the applicant.[1]
[1] The land was at relevant times owned by the applicant and his late brother. The parties approached their submissions on the footing that references to the applicant would include the applicant in his own right as well as in his capacity as trustee of his brother’s estate. I adopt the same course in these reasons and references to the applicant should be taken to include the applicant’s late brother during his lifetime.
The land comprised some 70 hectares of rural land in a location on the outskirts of Adelaide which, by the 1980s, had become an outer suburb of Adelaide. The subdivision resulted in the creation and sale of over 750 housing lots. The development works included infrastructure such as the construction of streets; the provision of utilities and stormwater management; public spaces; provision for a childcare centre; and a sound barrier on the estate’s boundary.
The land had been farmed by the applicant’s family for generations. The applicant entered into an agreement with a Developer under which the Developer at its own cost sought re-zoning and development approvals; carried out or caused the development works to be carried out; and marketed the subdivided lots. The applicant progressively gave the Developer access to the property as required and signed documents where necessary as owner, including contracts for the sale of the subdivided lots.
As the agreement came to be framed, the applicant received 20% of the proceeds of sale progressively as sales of the subdivided lots were completed, the Developer receiving the remaining 80%.
As the above summary indicates, the applicant’s role was, relative to the Developer’s, significantly more passive in nature. The central issue in the case is whether the activities carried out by the applicant were nevertheless such as to characterise the sales of the subdivided lots as made in the course or furtherance of an enterprise carried on by the applicant.
DECISIONS UNDER REVIEW
The applicant brought GST to account on the sales in their returns, then objected to the resulting deemed assessments of net amount. It is the two decisions of the Commissioner of Taxation disallowing objections against those assessments that are before the Tribunal for review.[2]
[2] The decisions relate respectively to 10 tax periods from 1 October 2015 to 31 March 2018 and 16 tax periods from 1 April 2018 to 31 March 2022. The parties approached the matter on the basis that the issues are common to both decisions. I adopt the same course.
STATUTORY FRAMEWORK
It is common ground that to succeed the applicant must discharge the burden of proving[3] that the applicant’s sales of the subdivided lots were not “made in the course or furtherance of an *enterprise that [the applicant carried on]” for the purposes of s 9-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act).[4]
[3] Taxation Administration Act 1953 (Cth), s 14ZZK.
[4] The applicant accepts that the other integers of the definition of “taxable supply” in s 9-5 are satisfied. If the applicant succeeded in proving the supplies were not taxable supplies, a separate issue would arise concerning whether Division 142 of the GST Act would operate to treat the “excess GST” as payable because it had been passed on to the purchasers of the land. In view of the conclusion I have reached regarding the primary issue, it is not necessary for me to consider Division 142.
The expression “enterprise” is defined in s 9-20(1) of the GST Act as follows:
9-20 Enterprises
(1) An enterprise is an activity, or series of activities, done:
(a) in the form of a *business; or
(b) in the form of an adventure or concern in the nature of trade; or
(c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property;
The expression “business” is defined in s 195-1 as:
business includes any profession, trade, employment, vocation or calling, but does not include an occupation as an employee.
This definition is inclusive. The specific inclusions are not relevant to this matter. My focus for the purposes of s 9-20(1)(a) is therefore on whether the applicant made the sales in the course or furtherance of an activity, or series of activities, done in the form of a business in accordance with the ordinary meaning of business, but noting it is sufficient if the activity or series of activities are in the form of a business.[5]
[5] The expression “carrying on” is defined expansively in s 195-1 but not in a way that either party submitted is relevant to this matter. I accept the applicant’s submission that “carrying on” connotes a degree of repetition.
APPROACH TO CHARACTERISATION OF THE SALES
A number of issues arise regarding the appropriate approach to determining whether the sales should be characterised as made in the course or furtherance of an enterprise carried on by the applicant.
The first is that, as the applicant emphasised, it is the activities of the applicant, not the Developer, that must be characterised. Hence, for example, it is not the activities of the Developer in obtaining the necessary approvals; carrying out the development works; and marketing the lots, that are the focus of the s 9-5(b) inquiry.
I accept that proposition which I did not understand to be in contest. However, I also accept, as the Commissioner submitted, that the context in which the activities of the applicant occurred, which includes the activities carried out by the Developer in accordance with its agreement with the applicant, is also relevant. The activities of the applicant can only be understood and sensibly considered in that context. That does not, however, mean that the Developer’s activities in obtaining the approvals; carrying out the development works; and marketing the subdivided lots, are imputed to and treated as activities of the applicant.
The second issue is the significance of the development agreement. I accept the applicant’s submission that it is appropriate to stand back and observe the commercial and practical reality of the sales rather than being “handcuffed” to the text of the agreement.[6] That assumes some relevance in this case where the evidence is that the applicant did not seek to exercise some of its rights under the development agreement. Nevertheless, the agreement is the logical starting point for determining the character of the sales in the context in which they were made.
[6] ATS Pacific Pty Ltd v Federal Commissioner of Taxation (2014) 219 FCR 302, [39]. Again, the Commissioner did not contest this proposition.
The third issue is the significance of findings of courts in other cases that may be broadly classified as subdivision cases. A factual finding in one case that a business or enterprise was or was not carried on cannot be binding on the Tribunal in this case. Further, reasoning from factual findings in another case is fraught, since no two cases are identical, and risks distracting from the statutory task.[7] That is especially so in relation to whether a business or series of activities in the form of a business is being carried, where the appropriate characterisation depends upon matters of fact and degree.
[7] Ghali v Chief Commissioner of State Revenue [2013] NSWCA 340, [40].
This issue is brought into particular focus by the parties’ references to two recent subdivision cases which are broadly analogous to the current case: Nerang Subdivision Pty Ltd & Ors v Hutson & Anor [2023] QSC 268; and Morton v Commissioner of Taxation [2025] FCA 336, with the additional feature that Moreton is on currently on appeal to the Full Federal Court. The difficulty in drawing guidance from other cases decided on their own facts is underlined by the different outcomes in these two cases.
There are factual differences between Nerang and Moreton. However, they share a fundamental similarity with the current case. Both involved substantial subdivisions of farming land. In both cases, the obtaining of approvals; causing the development works to be carried out; and marketing of the relevant subdivisions, were carried out by a developer pursuant to an agreement with the landowner who took, relative to the developer in each case, a more passive role. Nevertheless, the landowner in each case had and performed various obligations under a development agreement, directed at facilitating the development and sale of the land, and became the registered proprietor of, and was the vendor of, the subdivided lots when they were sold to the third-party purchasers. The landowner in each case was entitled to an agreed proportion of the proceeds of sale of the lots.
In Nerang, a GST case, Cooper J determined that, notwithstanding their limited nature relative to the activities of the developer, the activities engaged in by the landowner constituted activities carried out in the form of a business and therefore amounted to carrying on an enterprise for GST purposes.
In Moreton, an income tax case, Wheelahan J determined that the landowner did not carry on a business or engage in a profit-making scheme. Rather, the case was found to be in the category of a mere realisation of a capital asset.
It is not necessary for me to analyse these cases in detail. Suffice to say for current purposes, and notwithstanding the factual differences, if referring only to whether the landowner carried on a business, I would find it difficult to reconcile the approaches taken by the respective courts in the two judgements. However, as noted below, the GST concept of an enterprise is broader than a business.
In Nerang, the Court noted submissions regarding the significance of the circumstances in which the land was acquired (inheritance) and the absence of a profit-making intention at that time, along with earlier income tax cases involving subdivisions held to constitute a mere realisation of a capital asset. However, the Court was not persuaded those matters prevented the conclusion that the activities of the landowner amounted to carrying on an enterprise.
In Moreton, the Court concluded that the landowner’s role in the substantial subdivision, which involved the creation and sale of thousands of new lots, did not amount to a business. The Court stated a “very significant factor” telling against the landowner carrying on a business was that the landowner was not required to obtain finance to undertake the development, characterising the development as “really an isolated disposal”.[8]
[8] Moreton, [159], [165].
Consideration of these two cases leads to the fourth issue regarding the appropriate approach to characterisation of the applicant’s activities and the sales of the subdivided lots, which is concerned with the decisions in various income tax cases and observations of members of the High Court in the well-known case of Whitford’s Beach.[9]
[9] Commissioner of Taxation v Whitford’s Beach Pty Ltd (1982) 150 CLR 355.
The Commissioner referred to a body of older cases said to reflect a view that even extensive subdivision of land need not go beyond mere realisation of a capital asset or constitute venturing an asset into a business or profit-making undertaking or scheme. The Commissioner went on to submit that those older authorities do not reflect what the Commissioner called “the more modern view” said to be adopted by Mason, Murphy and Wilson JJ in Whitford’s Beach. The applicant rejects the notion that the earlier line of authorities is not reflective of “some ‘modern’ view or practice”.
I have not found it necessary to resolve this debate. It may well be that different outcomes in more recent cases reflect the large scale, with substantial infrastructure works, that characterise many modern subdivisions. However, that is not determinative as a matter of principle, as the authorities state and Moreton starkly illustrates. The debate seems more likely to distract from than illuminate the question for the Tribunal in this case which, it must be borne in mind, falls for consideration under the GST law.
That brings me to the fifth issue concerning the characterisation of the sales which is the difference between the income tax and GST provisions. In particular, that the definition of “enterprise” with its reference to a series of activities in the form of a business is broader than the concept of carrying on a business. That has been acknowledged judicially on a number of occasions.
McKerracher J stated in Commissioner of Taxation v Swansea Services Pty Ltd[10] that the concept of an enterprise is “substantially broader” than a business, leading to the conclusion that “capital” or investment activities, that would not be regarded as a business, may be an enterprise. His Honour seemed to endorse the statement that an enterprise may include activities that have the appearance or characteristics of business activities provided they are carried on for profit.
[10] [2009] FCA 402, [65], [66].
In Moreton, Cooper J endorsed comments to the same effect by White J in Toyoma Pty Ltd v Landmark Building Developments Pty Ltd.[11] His Honour then focused on the commercial nature of the arrangement between the landowner and the developer; the conduct of the landowner that facilitated the development and ultimate sales of the lots; and the number of contracts of sale (and earlier development leases) entered into by the landowner.
[11] [2006] NSWSC 83, [98], [99].
However, the difference in the outcomes of the judgements in Nerang and Moreton mentioned above cannot be entirely explained away by the difference between the GST and income tax provisions. That is because the Court in Moreton also determined that the landowner’s activities did not constitute the “carrying on or carrying out of a profit-making undertaking or plan” for the purposes of s 15-15 of the Income Tax Assessment Act 1997 (Cth).[12]
[12] Section 15-15 arose for consideration in Moreton because the land was acquired before the introduction of capital gains tax with effect from 20 September 1985: s 15-15(2)(b).
That concept appears to be at least as broad as the carrying on of “an activity or series of activities in the form of an adventure or concern in the nature of trade” under s 9-20(1)(b) of the GST Act. Both concepts seem to require a profit-making intention and that the profit is to be derived from activities of a commercial nature or a business deal, “the sort of thing a business person or person in trade does”.[13]
[13] Greig v Federal Commissioner of Taxation (2020) 275 FCR 445, [31], [241], [242(4)].
With these issues in mind, and with my focus squarely on the activities of the applicant, I consider below the relevant evidence including the background leading up to the entry into the development agreement; key features of the agreement; and aspects of its implementation in practice.
THE EVIDENCE
The following witnesses provided witness statements:
(a)the applicant;
(b)a Founding Director of a group of companies (Developer Group) which included the Developer;
(c)the Director of the Developer (and other entities in the Developer Group) who was the applicant’s primary contact with the Developer after the entry into the development agreement.
The Founding Director was not cross-examined. Although the applicant and the Director were cross-examined, there were no substantial controversies regarding the underlying facts. The controversy, rather, concerned the appropriate characterisation of the applicant’s activities by reference to those facts.
The accounts of the relevant facts set out below are drawn from the development agreement, witness statements and the oral evidence of the applicant and the Director.
BACKGROUND TO ENTRY INTO THE DEVELOPMENT AGREEMENT
The applicant’s forebears commenced acquiring and farming land in the locality in the mid-1800s. In 1977, the applicant and his late brother, along with a Third Brother, became the owners of the land in equal shares following the passing of their parents.
In the 1980s, lands in the locality commenced to be re-zoned for residential use, including part of the family’s land.
In around 2001, the Third Brother advised that he and his then wife were going to divorce and he needed to sell his share of the land to fund the divorce settlement. The applicant and his late brother wished to continue to farm and live on the land but could not afford to buy out the Third Brother’s share.
The applicant had become acquainted with a representative of the Developer Group when the Group had purchased a small tract of land from the family. Discussions ensued which led to an agreement under which an entity in the Developer Group would loan the applicant and his late brother sufficient funds to buy out their brother’s interest and a member of the Developer Group would gradually subdivide, develop and sell the residential-zoned land. A fixed amount per subdivided lot would be paid to the applicant progressively as the lots were sold after deducting the loan repayments.
THE DEVELOPMENT AGREEMENT
Around 2010, the Developer Group approached the applicant and his late brother with a new proposal to develop and sell around 70 hectares of the remaining land.
The following summary of the key features of the development agreement, and the parties’ obligations set out below, are extracted[14] from the applicant’s outline of submissions, which in turn is cross-referenced to clauses in the agreement, and unchallenged evidence contained in the witness statements:
[14] With appropriate anonymisation and references omitted for ease of reading.
(a)The applicant and his late brother were the ‘Landowner’, the Developer was designated as the ‘Developer’, and identified Allotments were designated as the ‘Land’ for the purposes of the agreement. I use the expression Allotments to refer to the identified Allotments.
(b)‘The Landowner wants to sell the Land and the Developer has approached the Landowner with a proposal to allow the Developer to undertake the Project, which is intended to maximise the financial return to the Landowner from the sale of the Land’.
(c)The ‘Project’ meant, principally, the development of the Allotments by the Developer, including its subdivision into residential ‘Allotments’, associated ‘Development Works’ such as earthworks and landscaping, and the marketing and sale of the allotments.
(d)Consideration would be paid to the applicant and his late brother by the Developer as follows:
(i)An initial $100,000 exclusivity payment.
(ii)For each subdivided lot, the Developer would pay the ‘Landowner’s Sale Proceeds’ and the GST component of the ‘Gross Proceeds’ of the sale within seven days. The former was defined to be the sum that was the greater of 25% of the proceeds of sale of the subdivided lot or $35,000.
(e)The Developer would receive the balance of the proceeds of sale of each lot after deducting the ‘Landowner’s Sale Proceeds’.
(f)At all times, the applicant and his late brother would remain the registered proprietors of the Allotments, until the subdivided lots were created and sold.
(g)The primary objective of the applicant and his late brother was stated to be ‘to maximise the financial return from the sale of the Land’ whereas the developer’s primary objective was stated to be to receive a financial return from the development of the Allotments in an amount generally considered acceptable within the property industry for similar projects.
(h)The applicant and his late brother would progressively give possession of the Allotments to the Developer in stages as land was required for the Project.
(i)The Developer on the one hand, and the applicant and his late brother on the other, were not in partnership.
Under the agreement, the Developer was required to undertake the following:
(a)Carry out and complete the Project at its own cost, including providing or procuring all necessary development, project management, marketing and sales services; in particular:
(b)Obtain a ‘Site History Report’ to ensure that there were no major impediments to developing the Allotments.
(c)Procure the re-zoning of the Allotments.
(d)Obtain development approval for the Project.
(e)Develop strategies, detailed designs and marketing programs for the Project; manage the development and civil works; and supervise all Project contractors.
(f)Develop a ‘Project Plan’, which included a program showing the dates on which the various proposed stages of the Project were forecast to be carried out or completed.
(g)Procure a real estate agent approved by the applicant and his late brother (but see further below) as having necessary expertise and experience.
(h)Take out and maintain appropriate insurance in respect of the Project.
Under the agreement, the applicant and his late brother agreed:
(a)To co-operate fully to allow the Developer access to the Allotments to obtain the ‘Site History Report’.
(b)To co-operate fully to allow the Developer to procure the re-zoning and promptly sign all documents to facilitate the re-zoning.
(c)To provide necessary consent (which could only be withheld in limited circumstances) so that the Developer could secure development approval for the Project.
(d)To provide a response to the Developer’s draft ‘Project Plan’ to which the applicant could object only in limited circumstances.
(e)Not deal with the Allotments in any manner inconsistent with the Project.
(f)That the Developer had the right to access and occupy the Allotments without interruption, provided the Developer performed its obligations under the agreement.
(g)At the Developer’s cost, to do all things requested by the Developer, that the Developer itself could not do, to facilitate the subdivision of the Allotments.
(h)If they wanted to sell the Allotments prior to re-zoning, to give the Developer the right of first refusal to purchase the land and similarly to give the Developer the right of first refusal once development approval was obtained.
It was significant to the applicant that the proceeds would be received progressively – as it was put for the applicant, like a form of superannuation. Additionally, the applicant retained the homestead and surrounding acreage for his daughter and her family.
The applicant was not required to fund any part of the development or engage or pay any contractor to carry out the development works. Thus, the ultimate cost of the development was entirely at the Developer’s risk. The applicant’s return was dependent upon completion of the project and the prices achieved for sales of the subdivided lots.
SOME ASPECTS OF THE IMPLEMENTATION OF THE AGREEMENT
In 2012, following representations from the Developer regarding the projected financial returns of the project, the applicant and the Developer agreed that the applicant’s share of the sale proceeds of each subdivided lot would be reduced to 20% and the $35,000 floor price removed.
Additionally, in practice not all of the limited rights conferred by the agreement were exercised by the applicant. For example, while the development agreement allowed for the applicant to review sales programs and annual plans, the applicant did not do so. However, the Director updated the applicant on progress from time to time and ensured that they were kept well informed.[15]
[15] Statement of Director dated 12 July 2024, [36].
This is consistent with the evidence of the Director that the Developer Group did not countenance active involvement of the landowner in its development projects; in particular, in the setting of prices or the selection of the real agent engaged to market subdivided lots. It is the Developer that has the expertise in development projects. The applicant, as he acknowledged, does not.
WERE THE SALES OF THE LOTS MADE IN THE COURSE OR FURTHERANCE OF AN ENTERPRISE?
The applicant’s case is essentially that the applicant’s role was passive and such rights as the applicant had and actions it took under the agreement were of an administrative nature not amounting to a series of activities in the form of a business or an adventure or concern in the nature of trade. It is therefore appropriate to start by examining what the applicant actually did in relation to the development:
(a)The applicant entered into a commercial agreement for the re-zoning, development, subdivision and sale of their land which bound the Developer to carry out the development works and other activities at very substantial costs in return for which the applicant received 20% of the sale proceeds. I consider it is reasonable to describe the development agreement as a sophisticated commercial agreement.
(b)The development, which the applicant caused to occur by entering into and discharging its obligations under the agreement, transformed the land both physically and legally from farming land to a large modern residential estate of over 750 residential allotments with substantial infrastructure and amenity.
(c)The applicant facilitated the development and sale of the land by progressively granting access to the Developer; executing documentation required for the Developer to seek re-zoning and development approvals; committing to, and actually, refraining from encumbering or selling the land for an extended period; executing over 700 sale contracts or allowing contracts to be executed under power of attorney.
(d)The applicant became the registered proprietor of the newly created lots. It was the applicant with whom the purchasers entered into contracts to purchase the lots and from whom title to the lots was transferred.
(e)The applicant engaged accountants to review the settlement statements for each and every one of the hundreds of sales.[16]
(f)The applicant filed business activity statements and paid amounts as GST over the sales phase of the development, which would require the applicant to account for GST on in excessive of 750 sales over an extended period.
[16] Transcript, P-36, lines 25-36.
These activities exhibited some of the well-known indicia of a business:
(a)Although entry into the development agreement was a one-off action, the applicant’s activities in facilitating its implementation were not. They had a degree of regularity and repetition:
(i)Access to the land was made available progressively as required.
(ii)The obligation not to encumber or sell the land during the project was ongoing.
(iii)In the selling phase, the signing of sales contracts and monitoring of sales returns was continuous, as each sale contract and settlement statement were received, and in the latter case carried out with professional assistance on each occasion.
(b)The development agreement, as already mentioned, was a sophisticated commercial arrangement with the applicant’s returns dependent upon sales prices achieved. It had, in my view, a commercial flavour. The applicant gave up 80% of the proceeds of sale of their land in return for the Developer’s obligations under the agreement. That reflected a commercial judgement by the applicant that the project would deliver, as it did, very substantial financial returns to the applicant.
(c)In that regard, the applicant re-negotiated terms of the agreement directly relevant to their commercial return. The applicant gave up 5% of the sale proceeds when agreeing to reduce their return from 25% to 20% of the sale proceeds. The applicant also gave up entitlement to a floor amount of $35,000 per lot that previously applied and agreed to allow more years to pass before the applicant would be able to exercise an option to sell the land. I infer from the Director’s account of his discussions with the applicant that this reflected a commercial judgement by the applicant that the previous arrangement would be a disincentive to the creation of additional but smaller lots and that, overall, both the Developer and the applicant’s returns would likely be improved as a consequence of the agreed changes.[17]
(d)The applicant monitored the performance of the project, to the extent that such performance could affect the financial outcome of the project for the applicant by way of receiving regular updates by the Developer and, in particular, monitoring sales proceeds for each sale with professional assistance. There was in that way a systematic approach by the applicant that was proportionate to the applicant’s financial interests in the outcome of the project.
(e)The applicant’s activities were on a substantial scale. The applicant’s obligation to grant the Developer access to the land and refrain from dealing inconsistently with the agreement applied and was discharged over an extended period. The applicant’s monitoring of the project was also ongoing over an extended period, both in terms of progress of the development by way of updates from the Developer, and the applicant’s returns by way of causing the applicant’s accountants to review every settlement statement as they were progressively received. The applicant’s engagement in signing contracts was significant, involving hundreds of sale contracts.
[17] Applicant’s statement dated 28 June 2024, [36]. Statement of Director dated 12 July 2024, [50]-[54].
The applicant put forward a number of arguments regarding why, notwithstanding these activities, the lots were not sold in the course or furtherance of an enterprise carried on by the applicant.
The applicant says they did not venture or put at risk any capital for the project. That is correct in the sense that the applicant did not contribute money to fund the development. But it was the applicant’s land that was developed. That, apart from the activities set out above, was their contribution to the project. Their asset was ventured into the project. It could not be sold or ventured elsewhere other than in terms governed by the agreement as set out above.
The applicant says they did not take a risk on re-zoning or development approval not being forthcoming; borrow any funds; or otherwise put moneys at risk. However, there was an opportunity cost in entering into the agreement that bound the applicant to the project over an extended period.
Additionally, the applicant’s financial return was directly tied to the sale prices able to be achieved. A drop in the property market over the extended period of the project could put the applicant’s judgement that a 25% share of the sale proceeds, later reduced to 20%, would be acceptable in a different light, or delay receipt of sale proceeds with a consequent loss of potential returns on investment of the sale proceeds. Nevertheless, I accept it is significant that the applicant was never at risk of loss of funds invested in the project, borrowed or otherwise.
The applicant says the practical reality of the tasks undertaken by the applicant was that they were administrative. They would not, the applicant says, be described as substantive or involving the exercise of business judgement. Whether the activities were substantive is a relative concept. For my part, I would not describe the activities set out above as not being substantive. They were essential to the project’s success and thus to the applicant obtaining their share of the sale proceeds.
Additionally, it is not inconsistent with the concept of carrying on a business for substantial obligations to be delegated to another entity,[18] an observation that carries greater force where, as in this case, the question is whether the activities are in the form of a business, as the outcome in Nerang illustrates.
[18] Hance v Commissioner of Taxation [2008] FCAFC 196, [77].
It is true that, aside from the entry into the agreement and the re-negotiation of key terms described above, as the applicant says the carrying out of those activities did not, in itself, generally involve the exercise of business judgement. But that is the case with a myriad of activities required to be carried out in the course of operating any business. The entry into the development agreement certainly involved the exercise of a commercial judgement as to the likely returns on the project for the applicant. So too did the renegotiation of the applicant’s agreed share of the sale proceeds and the period for which restrictions on sale would apply.
Finally, I give little weight to the applicant’s professed desire to receive proceeds gradually, as a form of superannuation. That may have formed part of the mix of considerations that led the applicant to enter into the development agreement, but it says little, in my view, regarding the character of the activities carried out by the applicant.
For these reasons, I find myself of a similar view, with respect, to that expressed by Cooper J in response to analogous submissions in Nerang, where his Honour stated:
In my view, the matters identified by the Administrator [here, the applicant] are not sufficient to prevent the conclusion that, by engaging in the activities required to comply with his obligations under the Deed [here, the development agreement] and the Development Leases, he is engaging in activities done in the form of a business and, consequently, carrying on an enterprise for the purposes of the GST Act.[19]
[19] Nerang, [43].
To be clear, I am not seeking to decide this matter by analogy with the judgement in Nerang. I also note the distinction highlighted by Ms Pierce who appeared for the applicant, that unlike in this case, the developer’s access to the lands in Nerang was more formally secured by “development leases”. The leases were, though, for a nominal rent. While the additional formality weighs in favour of a conclusion that the agreement in Nerang was of a commercial nature, the Developer’s access to the land in the current case is, nevertheless, the subject of legal rights (however, described) conferred by the development agreement.
Rather, the aspects I have taken into account include those emphasised by Cooper J. In my view, for the reasons outlined, the activities carried out by the applicant “have the appearance or characteristics of business activities”.[20] The parties’ agreement to undertake the project is a “commercial arrangement”.[21] The applicant’s role “is not entirely passive; [c]ritically, the aims of the Project cannot be achieved” without the applicant granting access to the lands and subsequently executing contracts of sale[22] or, I would add, without the range of other obligations falling upon, and discharged by, the applicant as set out above including signing or consenting to the re-zoning and development applications.
[20] Nerang, [47].
[21] Nerang, [50].
[22] Nerang, [51].
Accordingly, I conclude that the sales of the lots were made in the course of furtherance of a series of activities in the form of a business.
Consideration of the features of the project set out above also leads me to the conclusion that the applicant’s activities were a series of activities in the form of an adventure or concern in the nature of trade in terms of s 9-20(1)(b) of the GST Act.
Ms Pierce submitted that there is no element of “profit” or “trade” involved in the activities because the land was not bought with the intention of sale at a profit. However, it is sufficient if the series of activities is in the form of an adventure or concern in the nature of trade.
Accordingly, in my view, the analysis of whether the activities of the applicant are in the form of a business also supports the conclusion that they are activities in the form of an adventure or concern in the nature of trade. Entry into a sophisticated commercial agreement for a very substantial project, with ongoing obligations and activities spanning many years, ongoing monitoring of aspects of the project relevant to the achievement of the applicant’s financial outcome, and returns received progressively over a number of years, is the sort of thing a businessperson or person in trade does.[23]
[23] See [30] above. The Commissioner also submitted that the subdivided lots were sold in the course or furtherance of an activity or series of activities done on a regular or continuous basis in the form of a licence or other grant of an interest in property, arising out of the grant of access rights to the Developer, in accordance with s 9-20(1)(c). Whether or not the agreement conferred a licence or interest in the land, a separate issue is whether the sales were made in the course or furtherance of the grant of such a licence or interest or it is more accurate to say the licence or interest was granted in the course or furtherance of the development and sale of the lots. In view of the conclusions I have reached, it is not necessary to express a concluded view on this issue.
DISPOSITION OF REVIEW
For the reasons set out above, I have concluded that the applicant made the sales in the course or furtherance of an enterprise. Having regard to the applicant’s concession that the other integers for a taxable supply are satisfied, it follows that the assessments deemed to have been made when the applicant lodged returns bringing GST to account on the sales of the subdivided lots were not excessive.
It follows that the objection decisions must be affirmed.
Dates of hearing: 8-9 April 2025 Date final submissions received: 23 May 2025 Solicitors for the Applicant:
Counsel for the Applicant:
PricewaterhouseCoopers
C M Pierce, W M Stone
Solicitors for the Respondent:
Litigation and Legal Services, Australian Taxation Office
Counsel for the Respondent: S J H Ure
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