Non-Profit News Service No. 0368 - GST determinations released on GST consequences of the sale of leased premises

On 22 February 2012, we published two GST determinations on the GST consequences of buying and selling residential or commercial premises that are subject to a lease.

GSTD 2012/1 - Goods and services tax: what are the GST consequences following the sale of residential premises that are subject to a lease? covers residential property and explains that:

• after a vendor sells a property that is subject to a lease, there is a continuing input taxed supply of the property to the lessee
• the purchaser of residential premises is not entitled to an input tax credit under section 11-20 in respect of the purchase of the premises if, and to the extent that it is intended, that the lease will continue following the completion of the sale
• the purchaser may have an increasing adjustment under Division 135, where residential premises subject to a lease are acquired through a supply of a going concern under section 38-325, or a GST-free supply of farm land under section 38-480, and the purchaser intends that the lease will continue.

GSTD 2012/2 - Goods and services tax: what are the GST consequences following the sale of commercial premises that are subject to a lease? covers commercial property and explains:

• the purchaser's GST liability and input tax credit entitlements
• that the vendor of the commercial premises is not liable for GST relating to the lease where it is no longer in receipt of or entitled to rent or other consideration for the lease following the sale of the reversion.

These GST determinations are consistent with and explain the ATO view of the law following the Full Federal Court decisions in:

• South Steyne Hotel Pty Ltd & Ors v. Commissioner of Taxation
• Westley Nominees Pty Ltd v. Coles Supermarkets Australia Pty Ltd.

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