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Edited version of private ruling
Authorisation Number: 1011730519931
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Ruling
Subject: Goods and services tax (GST) and consideration
Question
Does the "consideration" (for GST purposes) for your taxable supply include the amount that represents the Stamp Duty you receive from the Purchaser as part of the "Purchase Price"?
Answer
Yes, the "consideration" (for GST purposes) for your taxable supply includes the amount that represents the Stamp Duty you receive from the Purchaser as part of the "Purchase Price".
Relevant facts and circumstances
You are carrying on an enterprise and you are registered for GST.
You carry on an enterprise for GST purposes.
You have entered into a Sale and Purchase Agreement (SPA) with a Purchaser for the sale of your business.
The sale of your business is for consideration.
Under the SPA, for the purchase of your business, the Purchaser will pay an amount that includes a component relating to Stamp Duty on Completion.
You have provided the relevant clauses of the SPA. The clauses of the SPA provide for the consideration to include an amount that relates to Stamp Duty.
You have advised that Stamp Duty is the statutory liability of the Purchaser. You will pay the Stamp Duty "on behalf of the Purchaser" to the State authority, pursuant to a clause in the SPA. You pay this amount to the OSR "on behalf of" the Purchaser in satisfaction of the Purchaser's statutory liability.
Reasons for decision
Summary
The "consideration" (for GST purposes) for your taxable supply includes the amount that represents the Stamp Duty you receive from the Purchaser as part of the "Purchase Price".
Detailed reasoning
Consideration is defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to mean 'any consideration, within the meaning given by section 9-15, in connection with the supply or acquisition.'
Section 9-15 of the GST Act provides that a payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply. Consideration for a supply is something the supplier receives for making the supply.
In this case, under the terms and conditions of the SPA, the parties have agreed that the consideration to be provided by the Purchaser for the purchase of your enterprise includes an amount of Stamp Duty.
There is no provision in the GST Act that stipulates how businesses should determine the amount of consideration for their supplies. In general terms, the actual price of a supply or the amount of consideration to be paid for a particular supply is a matter of agreement between the supplier and the recipient.
We consider that a reference to "Stamp Duty" in the relevant clause of the SPA merely refers to a component that is to be included in working out the total consideration payable by the Purchaser for the purchase of the business.
As such, the Purchaser is not paying "Stamp Duty" to a State Government, but rather, the payment forms part of the calculation of the consideration for the purchase of the enterprise. The payment of this consideration is for your supply of the business to the Purchaser pursuant to the terms and conditions of the SPA.
You have advised that Stamp Duty is the statutory liability of the Purchaser. You will pay the Stamp Duty "on behalf of the Purchaser" to the State authority, as per a clause in the SPA.
We consider that, despite the fact that your subsequent payment of the Stamp Duty to the State authority may be "on behalf of" the Purchaser and in satisfaction of the Purchaser's statutory liability, you are also making this payment in satisfaction of your contractual obligation under the terms and conditions of the SPA.
Based on the clauses provided, this does not have the effect of changing the amount of consideration which is payable by the Purchaser for the purchase of your business. Nothing in the relevant clauses states that the consideration for the purchase of the business is to be changed upon payment of Stamp Duty by you "on behalf of" the Purchaser. Also, the clauses do not state that the Purchaser is required to reimburse you for the Stamp Duty paid by you to the State authority "on behalf of" the Purchaser.
As previously mentioned, the amount of consideration to be paid for a particular supply is a matter of agreement between the supplier and the recipient. Therefore, based on the information provided, the consideration for your taxable supply includes the amount representing the Stamp Duty you receive from the Purchaser as part of the "Purchase Price", as agreed by the parties under the terms and conditions of the SPA.
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