ATO Interpretative Decision
ATO ID 2001/446 (Withdrawn)
Goods and Services Tax
GST and Court consent orderFOI status: may be released
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This ATO ID is withdrawn and replaced by ATO ID 2003/1173.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a landowner, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives payment under a court consent order for the compulsory acquisition of its land, gazetted after 1 July 2000?
Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when it receives payment under a court consent order for the compulsory acquisition of its land, gazetted after 1 July 2000.
Facts
The entity is a land owner.
A parcel of land was compulsorily acquired from the entity. The Notice of Acquisition for the compulsory acquisition of the land was gazetted after 1 July 2000. The entity commenced a court action regarding the compensation for the compulsory acquisition.
A court consent order was made after 1 July 2000 that specified an amount payable for various claims including the compensation for the compulsory acquisition.
The entity is registered for goods and services tax (GST). The 'transaction' satisfies the other requirements in section 9-5 of the GST Act.
Reasons for Decision
Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5 of the GST Act.
Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(d) of the GST Act states that a supply includes a grant, assignment or surrender of real property. In this case, a parcel of the entity's land is compulsorily acquired. Therefore, the supply is the surrendering of the land by the entity.
The next step is to determine whether the payment received by the entity because of the court consent order is for the supply of the entity's land.
Goods and Services Tax Ruling, GSTR 2001/4 provides guidance as to the application of GST to court orders and out-of-court settlements. Paragraph 100 of GSTR 2001/4 provides that there must be a sufficient nexus between the payment made under the court order (including consent orders) and a supply before GST may apply.
Paragraph 101 of GSTR 2001/4 provides that:
'Where the only supply (other than a discontinuance supply) in relation to a court order or out-of-court settlement is an earlier supply and a sufficient nexus exists between the payment made under that order or settlement and the earlier supply, the payment will be consideration for that supply.'
The entity's land was compulsorily acquired and the amount received by the entity under the court consent order includes compensation for this compulsory acquisition. Therefore, it is considered that there is a sufficient nexus between the supply of the land and the payment of compensation under the court consent order.
In this case, the consideration received by the entity is for the compulsory acquisition of its land and the transaction is a supply that satisfies the other requirements in section 9-5 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act, when it receives payment under a court consent order for the compulsory acquisition of its land.
Date of decision: 30 July 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 9-10
paragraph 9-10(2)(d)
Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2001/4
ATO ID 2001/445
Keywords
Goods & services tax
Taxable supply
GST transitional issues
Time of supply/acquisition
ISSN: 1445-2782
| Date: | Version: | |
| 30 July 2001 | Original statement | |
| You are here | 9 January 2004 | Archived |