GST and whether property activities are an enterprise

Earlier this year the Administrative Appeals Tribunal (AAT) issued its decision in Lance’s Case (Lance v Commissioner of Taxation (Taxation) [2024] AATA 11).

The ATO audited Mr Lance and issued an assessment on the basis that the sale by Mr Lance of a property, referred to as Sutton Farm, was a taxable supply.

Mr Lance objected on two grounds:

  • That the sale of the property was not made in the course or furtherance of an enterprise carried on by him under the GST rules; and/or
  • That the sale was an input taxed supply of residential premises.

The objection was disallowed, and Mr Lance applied to the AAT.

The AAT summarises its decision in paragraph 3, stating:

  • Mr Lance is liable to pay GST;
  • the sale was a taxable supply because it was a supply of real property made by Mr Lance in the course or furtherance of an enterprise being carried on by him;
  • Mr Lance failed to prove that all the development works relating to the subdivision of the property were not carried on in the course or furtherance of an enterprise; and
  • the sale was not an input taxed supply of residential premises because it did not meet the definition of “residential premises” as the buildings were uninhabitable.

The decision highlights the importance of GST fundamentals, noting that a supply will only be subject to GST if all the conditions of the definition of ‘taxable supply’ are met, and none of the exclusions apply. It also highlights the importance of the underlying facts, and having supporting evidence consistent with those facts.

An entity makes a ‘taxable supply’ where:

  1. you make the supply for consideration; and
  2. the supply is made in the course or furtherance of an enterprise that you carry on; and
  3. the supply is connected with the indirect tax zone; and
  4. you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In Lance’s Case the issues related to condition (b) and the input taxed exclusion.

Residential Premises

Generally, a supply of residential premises is an input taxed supply. The issue of whether the property was residential premises was dealt with rather briefly in the decision – noting that Sutton Farm was not capable of being occupied as it did not provide shelter and basic living standards. That Mr Lance had moved a caravan onto the property did not change this, as the caravan was never considered part of the property and did not form part of the sale. In any event, at the hearing, Mr Lance conceded the property was not ‘residential premises’.

In the course or furtherance of an enterprise

In terms of the taxable supply conditions, we note that real property located in Australia is ‘connected with the indirect tax zone’, so condition (c) was satisfied. A sale of such property for an agreed contract price would also meet condition (a). If the entity making the sale is registered for GST, then condition (d) is also met. This aspect was not really discussed in the decision, but it is clear that Mr Lance was GST-registered, given the reference to Business Activity Statements (BASs) having been lodged, and as GST credits had been claimed by Mr Lance in relation to development activities for Sutton Farm.

This leaves condition (b), which was the substantive matter dealt with in the case.


There are various aspects to consider when determining if a supply is made by a GST-registered entity in the course or furtherance of an enterprise.

Firstly, not all activities of a GST-registered entity will meet this condition. The decision refers to the Explanatory Memorandum to the Bill that introduced the GST law where it states:

In the course or furtherance of your enterprise

3.10 ‘In the course or furtherance’ is not defined, but is broad enough to cover any supplies made in connection with your enterprise. An act done for the purpose or object of furthering an enterprise, or achieving its goals, is a furtherance of an enterprise although it may not always be in the course of that enterprise. ‘In the course or furtherance’ does not extend to the supply of private commodities, such as when a car dealer sells his or her own private car. See Case N43 (1991) 13 NZTC 3361.

The example of the car dealer is a good one. If an individual is GST-registered and carries on a business (enterprise) as a car dealer, but also owns a car for private use, while the sale of the car would meet conditions (a), (b) and (d) of taxable supply, condition (c) would not be met on the basis that the sale is a private one and not a sale that takes place in the course or furtherance of that enterprise. Of course, the car dealer would need to have sufficient evidence to support this.

Secondly, it is relevant whether the activities constitute an enterprise – that is, in the case of Mr Lance, ‘an activity, or activities, done in (a) the form of a business; or (b) in the form of an adventure or concern in the nature of trade’. If so, there is also the need to conclude that the supplies being made were done so in the course or furtherance of that enterprise.

The case sets out a history of the activities undertaken by Mr Lance, with some of the key activities listed below:

  • In 2013, Mr Lance acquired a property referred to as 5 Apollo Place (which was adjacent to Sutton Farm) and which Mr Lance intended being his ‘retirement property’. However, when Sutton Farm came up for sale it replaced 5 Apollo Place as his ideal property;
  • In 2013, Mr Lance acquired Sutton Farm for $1.6m which included three structures – a homestead, a large barn and a ‘single men’s quarters’ – all built in the 1860’s with cultural and historical significance;
  • In 2014, Mr Lance subdivided and sold 5 Apollo Place (for combined proceeds of $900,000);
  • In 2014, Mr Lance took out a bank loan for $1m and also borrowed $1.5m from his brother-in-law so that Mr Lance would commence developing Sutton Farm;
  • Mr Lance engaged various experts to assist with the development process including re-zoning but experienced numerous hurdles including having to provide public walkway access to the waterfront;
  • In 2016, a development plan was lodged seeking four lots: the homestead lot, separate lots marked out for residential use, and one lot marked out for short stay accommodation;
  • In September 2017, the development plan was approved for a single residential lot in the centre of the property;
  • In October 2017, Mr Lance lodged a subdivision application with Council for further lots;
  • In December 2017, Council required Mr Lance to acquire adjacent land for the public accessway;
  • Although Mr Lance indicated he never intended to acquire this land, but Council would only provide subdivision approval if he acquired it;
  • In 2017, due to delays and setbacks, Mr Lance tried to sell the property, without success stating he ‘wouldn’t make his money back on the sale’;
  • In June 2018, Mr Lance was provided with a contract of purchase for the accessway land for $10,000 of which Mr Lance paid the $1,000 deposit (but which appears not to have settled);
  • In 2019, after another two years of dealing with Council, Mr Lance decided to sell the property stating he was desperate to sell it due to his financial situation and stress and anxiety to his health;
  • In November 2020, he eventually sold the property for $4.25m, which settled in February 2021;
  • The sale contract had the box ticked next to the statement “GST is NOT applicable to the Contract”; and
  • Mr Lance did not report the sale in his February 2021 BAS.
  • It appears throughout this period Mr Lance claimed GST credits relating to development costs incurred, and that his accountants considered these credits were claimed correctly as some of the lots would eventually be sold as taxable supplies, even though one lot would be retained as Mr Lance’s residence.

The AAT was clear in its assessment of the facts, and in concluding, that Mr Lance was carrying on an enterprise and the sale of the property was made in the course or furtherance of him carrying on that enterprise. Not only did the AAT conclude that his activities were in the form of a business they were also in the form of an adventure or concern in the nature of trade. The AAT expressly stated that the evidence shows Mr Lance was engaged in developing the property to enhance its value and make a profit by way of selling that property. The AAT rejected that the development works were a mere realisation of the property and had no commercial purpose.

Other factors against Mr Lance included that:

  • he was not a reliable witness, and there were ‘numerous inconsistencies and shortcomings in his claims’;
  • the AAT did not accept Mr Lance’s evidence that Sutton Farm was to be subdivided into 4 lots, all of which were to be used by him and his family;
  • there was no independent corroboration of Mr Lance’s claims, and they were inconsistent with documents before the AAT (including by external media, his accountants and lawyers); and
  • the AAT referred to Example 29 from MT 2006/1, where an individual acquired a beachfront property to live in, but in order to do so his plan was to build two residences (duplex) and sell one so that this could assist in funding the residence to be lived in. (Unsurprisingly, the ATO considers this to be an enterprise.)


We often see facts and circumstances where it is clear whether activities of a taxpayer are a mere realisation of property or constitute an enterprise. We also see facts and circumstances where it is not clear. However, in those cases often it is the general or overall impression that assists in determining whether the activities go so far as to comprise an enterprise. The facts and circumstances, the supporting evidence, and the overall impression in Lance’s Case seems pretty clear. However, it again reminds us of the importance of applying the fundamentals, and that a taxpayer requires sufficient supporting evidence to discharge its onus of proof when challenging tax matters.


Found this article insightful? Subscribe to our newsletter “The Assessment” and receive more articles like this every month!

Need more advice? Contact us via email or on 03 8662 3200

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. Webb Martin Consulting Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.

Subscribe to The Assessment newsletter and follow us on LinkedIn for more articles and updates.


Follow Us