ATO Interpretative Decision
ATO ID 2004/303
Goods and Services Tax
GST and supply of residential premises together with assignment of development consentFOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 property developer that is making an input taxed supply of residential premises, making a separate taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when under a contract of sale, it assigns to the purchaser a development consent that runs with the premises?
Decision
No, the entity is not making a separate taxable supply under section 9-5 of the GST Act when under a contract of sale it assigns to the purchaser a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent.
Facts
The entity is a property developer. The entity is selling residential premises. The sale of the residential premises is an input taxed supply under section 40-65 of the GST Act.
Prior to the sale, the entity obtained a development consent in relation to the residential premises. Under the contract of sale, the entity formally assigns that development consent to the purchaser.
The development consent is attached to the land and runs with the land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself.
The entity is registered for goods and services tax (GST).
Reasons for Decision:
Section 9-5 of the GST Act sets out the requirements that must be satisfied for a supply to be a taxable supply. It further provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed.
Before determining whether a taxable supply is being made in relation to the development consent, the substance of the supply or supplies must be established. That is, in relation to the formal assignment of the development consent, it must be determined whether the entity is making a separate supply from its input taxed supply of the residential premises.
The development consent is attached to the land belonging to the residential premises and runs with that land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. This transfer takes place regardless of the formal assignment in the sale contract. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself.
Therefore, the entity is not supplying the purchaser with anything more than the residential premises. The formal assignment of the development consent does not amount to a separate supply because it does not effect the transfer of anything that was not already transferred to the purchaser as a direct and natural consequence of the sale of the premises.
As such, the entity is not making a separate taxable supply under section 9-5 of the GST Act when it assigns to the purchaser, under the contract of sale, a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent.
Note: Where a formal assignment of the development consent effects a transfer of something more than that resulting naturally from the transfer of the land itself, the additional assignment may be a separately identifiable supply, which may be a taxable supply where all of the requirements of section 9-5 of the GST Act are satisfied.
Date of decision: 5 December 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 40-65
Keywords
Goods and services tax
GST property & construction
GST residential premises
GST sale of real property
GST supplies & acquisitions
GST supply
Taxable supply
Input taxed supplies
ISSN: 1445-2782