Case Study - Family Trusts, Land and GST


Two long standing family trusts from two branches of family own a significant piece of residential land. One branch of the family wants to sell, and the other branch wants to keep the land. The problem is that the land is in a single title.

Tax Issues

The land is not in the GST net and a subdivision of the land is likely to be a GST taxable activity. This would mean that the sale of land is subject to GST, but no input would be available as the land was acquired pre-GST.


The solution was to create a non-associated buyer for the land, who while within the family is not associated for the purposes of section 3A of the GST Act and the second-hand goods associated persons definitions. This entity will be a developer and will buy the land, claim a GST second-hand good on it and subdivide it. Half of the land will then be transferred back to the branch of the family that wishes to retain it on an ongoing basis, while the other half will be on sold to third party buyers.


  1. The GST second-hand goods provision provides an input on the whole of the land value, and while the branch of the family that wishes to retain the land won't be carrying on a GST activity, if they ever change their mind in the future they would at least get a GST input because they paid GST when they bought it back from the development entity.
  2. Through careful structuring and working through the family dynamics and respective interests, a solution can be developed that both works from a tax technical viewpoint yet meets the requirements of the dynamics of the family.

Next Steps

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