No GST argument a loser for farmer at Tribunal

Introduction

In May this year, we saw a favourable tax case, Morton v FCT [2025] FCA 366, for a farmer who avoided Capital Gains Tax (CGT) after selling part of his property because the land was acquired pre-CGT (before 19 September 1985).

A new case has now highlighted the other major tax consideration when farmers subdivide land: GST.  In VZFS v FCT 2025 ARTA 2013 the Administrative Review Tribunal (ART) ruled that a South Australian farmer was liable for GST on the sale of more than 750 subdivided lots despite arguing that the sales were merely a realisation of a capital asset and not an enterprise for GST purposes.

This decision is a significant reminder that even when a landowner views their involvement as passive, the GST law can still treat them as carrying on an enterprise.

Background to the Case

The taxpayer and his late brother jointly owned 70 hectares of farmland. They entered into a development agreement with a property developer who paid for all rezoning and development approvals, constructed roads and infrastructure, marketed the lots, and sold the developed land on the taxpayer’s behalf.

Under this agreement, the taxpayer received 20% of the total sales proceeds, with the developer receiving the remaining 80%. As contracts for each of the 750+ lots were completed, the taxpayer signed or authorised the sale documents, reviewed settlement statements, and lodged BASs declaring GST.

The central issue was whether the taxpayer’s actions amounted to carrying on an enterprise for GST purposes.

When Do Land Sales Become a GST Enterprise?

GST applies to supplies made “in the course or furtherance of an enterprise”. The threshold for an enterprise is lower than the threshold for a business under income tax.

Factors include:

• Size and profit
• Nature, scale and complexity
• Related activities
• Purpose or intention
• Level of personal involvement

The Tribunal’s Findings

The Tribunal concluded that the development arrangement had all the hallmarks of a commercial enterprise. Although the taxpayer argued that his role was passive, the agreement he entered into was a sophisticated, profit-driven arrangement that required ongoing involvement from him over many years. His actions involving granting access to the land, signing hundreds of sale contracts, working with advisers to review settlement statements, and renegotiating commercial terms, were central to the progress and success of the development.

Importantly, the Tribunal emphasised that the relevant activities are those of the taxpayer, not the developer. Even though the developer undertook the physical construction and marketing, the taxpayer’s own conduct still amounted to a series of activities carried out in the form of a business or an adventure in the nature of trade.

This conclusion was supported by several features of the arrangement: the land was transformed into a master-planned residential estate; the project unfolded over many years with regular, systematic involvement from the taxpayer; and the scale of the transactions (more than 750 lot sales) reflected a commercial undertaking rather than a mere realisation of a capital asset.

What This Means for Landowners

The case reinforces that GST can apply even where a landowner does not see themselves as a developer and believes their involvement is limited. Entering into a structured development agreement, especially one involving staged sales and profit-sharing, can readily push an activity into enterprise territory for GST purposes.

Conclusion

The VZFS case reinforces that subdivision and sale of farmland can easily fall within the scope of a GST enterprise—particularly where the landowner is actively involved in facilitating the project, negotiating commercial terms and executing numerous sale documents.

Where land is significantly transformed or where the owner is required to participate in approvals, contract execution, or financial management, the GST risk increases. Given the relatively low threshold for what constitutes an enterprise under the GST Act, landowners should obtain detailed tax advice before committing to development arrangements or signing agreements with developers.