ATO Interpretative Decision

ATO ID 2002/4 (Withdrawn)

Goods and Services Tax

GST and assignment of right to receive rental income
FOI status: may be released

This ATO ID is withdrawn from 13 February 2002. This decision does not accurately represent the ATO view and has been withdrawn.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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, an owner of residential premises, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it assigns to a property developer its right to receive rental income in return for guaranteed income from the property developer?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it assigns to a property developer its right to receive rental income in return for guaranteed income from the property developer.

Facts

The entity is an owner of residential premises. The entity purchased the residential premises from a property developer.

The entity assigns its right to receive rental income from the residential premises to the property developer for a fixed period. In return the property developer agrees to provide the entity with a guaranteed amount, worked out as a percentage of the purchase price, for the fixed period.

The entity is registered for goods and services tax (GST) and is carrying on an enterprise of leasing. The contract between the entity and the property developer was entered into in Australia.

Reasons for Decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

•: it makes a supply for consideration;
•: the supply is made in the course or furtherance of an enterprise that the entity carries on;
•: the supply is connected with Australia; and
•: the entity is registered or required to be registered for GST.

'Supply' is defined in section 9-10 of the GST Act to include the creation, grant, transfer, assignment or surrender of any right (paragraph 9-10(2)(e) of the GST Act). In this case, the entity is assigning its right to receive rental income to the property developer. Therefore, the entity is making a supply as defined in section 9-10 of the GST Act.

Under paragraph 9-5(a) of the GST Act, the supply made by the entity must be for consideration. 'Consideration' is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance, in connection with, in response to or for the inducement of the supply of anything. The property developer is providing the entity with a guaranteed sum of money in return for the supply of the right. As such, the guaranteed sum of money is the consideration for the supply and the first requirement in section 9-5 of the GST Act is satisfied.

The second requirement in section 9-5 of the GST Act is that the entity's supply must be in the course or furtherance of the enterprise that the entity carries on. In this case, the entity is carrying on an enterprise of leasing. As part of this enterprise it has entered into the agreement to supply the right to the property developer. Therefore, the entity is making the supply in the course of its enterprise and the second requirement in section 9-5 of the GST Act is satisfied.

The third requirement in section 9-5 is that the entity's supply is connected with Australia. Section 9-25 of the GST Act provides that a supply of a thing other than goods or real property is connected with Australia if:

•: the thing is done in Australia; or
•: the supplier makes the supply through an enterprise that the supplier carries on in Australia.

Paragraph 62 of Goods and Services Tax Ruling GSTR 2000/31 provides that the meaning of 'done' depends on the nature of the thing being supplied. 'Done' can mean performed, executed, completed, finished etc depending on what is being supplied.

Paragraph 74 of GSTR 2000/31 provides the assignment of a right to another is done where that right is assigned to the other person. In this case, the agreement between the entity and the supplier was made in Australia, and therefore, the assignment of the right was done in Australia.

The last requirement in section 9-5 of the GST Act is that the entity is registered or required to be registered for GST. In this case, the entity is registered for GST.

The entity is making a supply that meets the requirements of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it assigns to a property developer its right to receive rental income in return for guaranteed income from the property developer.

Date of decision: 9 November 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-5(a)
   section 9-10
   paragraph 9-10(2)(e)
   subsection 9-15(1)
   section 9-25
   Division 38
   Division 40

Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2000/31

Keywords
Goods & services tax
GST supplies & acquisitions
Connected with Australia
GST consideration
GST enterprise
Taxable supply

Business Line: GST

Date of publication: 9 January 2002

ISSN: 1445-2782

history

	Date:	Version:
	9 November 2001	Original statement
You are here	13 February 2002	Archived

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