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  • Property and Construction Industry Partnership – issues register – section 10 – leased or rented property

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    Property and construction industry issues register

    Issue number

    Index

    Date

    10

    Leased or rented property

    10.1

    Rulings on GST-free supplies under existing agreements

    09/04/01

    10.2

    Transitional and general issues

    10.2.1

    Are supplies of commercial premises by way of lease subject to GST?

    21/01/04 (w)

    10.2.2

    Does a ‘rates and taxes’ clause under a long term lease give rise to a ‘review opportunity’?

    21/01/04 (w)

    10.2.3

    Does an ’option to renew’ clause amount to a review opportunity and does the exercise of the option to renew result in the parties entering into a new lease?

    21/01/04 (w)

    10.2.4

    Does a clause which calculates rent based upon the turnover of the lessee's business amount to a review opportunity?

    21/01/04 (w)

    10.2.5

    Will a valuer, asked to conduct a rent review under a lease agreement on or after 8 July 1999, include an uplift for GST or take GST into account directly or indirectly in fixing the value?

    21/01/04 (w)

    10.2.6

    Is a market rent review a review opportunity?

    21/01/04 (w)

    10.2.7

    It may be necessary to establish whether the recipient of the supply is entitled to claim full input tax credits. Will a declaration made by the recipient of the supply be sufficient to satisfy this requirement?

    21/01/04 (w)

    10.2.8

    Can a lessee claim input tax credits for lease payments made on or after 1 July 2005, where all of the requirements in section 13 of the Transition Act have been satisfied?

    21/01/04 (w)

    10.2.9

    Can landlords claim input tax credits for the GST included in the price of building expenses?

    21/01/04 (w)

    10.3

    General

    10.3.1

    Is GST payable on the supply of commercial premises by way of lease where the lease:

    • is silent on GST?
    • payments can be grossed up?
    • was entered into before 1 July 2000 and a fixed contract price is stated?

     

    21/01/04 (w)

    10.3.2

    When is GST payable on the supply of commercial premises by way of lease where the lease explicitly states that GST is recoverable?

    21/01/04 (w)

    10.3.3

    Is the supply of a rent free period subject to GST?

    09/04/01

    10.3.4

    Is a lease of commercial property a taxable supply if the lease is supplied to the Commonwealth or a Commonwealth entity?

    21/01/04 (u)

    10.3.5

    An investor, who is registered for GST, purchases new residential premises from a builder who is also registered for GST. The house has all the usual physical characteristics to enable it to be used for residential accommodation. The investor then supplies the house by way of lease to the builder who intends to use it as a display home.

    (1) Is the investor entitled to claim an input tax credit in relation to his purchase of the house from the builder?

    (2) Is the supply of the house by the investor to the builder by way of lease an input taxed supply, or a taxable supply?

    01/03/02 (a)

    19/12/2012 (w)

    10.4

    Examples

    10.4.1

    Entity A, who is not required to be registered for GST, intends to buy a shop to lease to another entity.

    (a) Is the lease of the shop a taxable supply?

    (b) If the shop is sold with the lease intact, is the sale a taxable supply?

    21/01/04 (u)

    10.4.2

    Entity B buys a shop to carry on a business (its only enterprise). Entity B is registered for GST, and claims an input tax credit for the purchase of the shop. It later sells the shop for $200,000.

    (a) What are the GST implications if, six months before the shop is sold, the business ceases trading?

    (b) If the shop is sold together with the business, is the sale a taxable supply?

    21/01/04 (u)

    10.4.3

    Entity C buys a shopping centre containing a number of shops from which it derives commercial rents. If entity sells the shopping centre, is the sale a taxable supply?

    21/01/04 (u)

    10.4.4

    Entity D buys a shop with the intention of resale for a profit, but leases it out for about 6 months before selling it. Entity D has no other enterprise and is not required to be GST registered for the lease of the shop as the annual rent is less than $75,000. Is the sale of the shop a taxable supply when it is sold for $200,000?

    21/01/04 (u)

    10.4.5

    Is a refundable rental bond paid by a lessee of commercial premises consideration for a taxable supply made by the lessor if it is a security deposit for the lessee to perform all its obligations under the lease?

    18/10/02(a)

    10.5

    Long term leases

     

    10.5.1

    If a supplier, who holds a freehold interest in land, supplies that land by way of lease to a lessee, is it possible for the lease to be a long term lease for the purposes of the GST Act?

    05/06/01(a)

    Table note: (a) added, (u) updated, (w) withdrawn

    Legislative references in this document

    Term used

    Details

    GST Act

    A New Tax System (Goods and Services Tax) Act 1999

    GST Regulations

    A New Tax System (Goods and Services Tax ) Regulations 1999

    Transition Act

    A New Tax System (Goods and Services Tax Transition) Act 1999

    Transition Regulations

    A New Tax System (Goods and Services Tax Transition) Regulations 2000

    Relevant public rulings

    • GSTR 2000/16 Goods and services tax: transitional arrangements – GST- free supplies under existing agreements
    • GSTR 2012/5 Goods and services tax: residential premises
    • GSTR 2012/6 Goods and services tax: commercial residential premises
    • GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover
    • GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free?

     

    Relevant sections

    • Section 9-5 'Taxable supplies' of the GST Act
    • Section 11-5 'Creditable acquisitions' of the GST Act
    • Section 13 'Existing Agreements: no opportunity to review' of the Transition Act
    • Subdivision 38-J 'Supplies of going concerns' of the GST Act
    • Section 40-35 'Residential rent' of the GST Act
    • Division 99 'Deposits as security'
    • Section 188-25 'Transfer of capital assets, and termination (etc) of enterprises, to be disregarded' of the GST Act
    • Section 195-1 'Definition' of the GST Act

     

      Last modified: 17 Jul 2020QC 16481