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Edited version of your written advice
Authorisation Number: 1012718929038
Ruling
Subject: GST and the right to receive an input taxed supply pursuant to entry into a nomination deed
Question
Is the supply by Entity B (Grantee) to Entity C (Nominee) under the Nomination Deed, in consideration of the Nomination Fee, an input taxed supply under paragraph 9-30(2)(b) of the GST Act?
Answer
Yes. The supply by the Grantee to the Nominee under the Nomination Deed, in consideration of the Nomination Fee is an input taxed supply under paragraph 9-30(2)(b) of the GST Act. Relevantly the supply is the right to receive a supply of residential premises which is input taxed. Accordingly the right to receive a supply that would be input taxed is not a taxable supply.
Relevant facts and circumstances
Entity B is registered for GST.
Entity A (Grantor) and Entity B (Grantee) entered into a Deed of Call Option pursuant to which Entity A provided Entity B with a call option (the Call Option) for the purchase of residential premises (the Property). A copy of the Deed of Call Option agreement has been provided with this ruling request.
The Deed of Call Option sets out the following relevant terms and conditions between the Grantor and Grantee.
• Subject to the payment of the Option Fee by the Grantee to the Grantor, the Grantor grants an option to the Grantee to purchase the Property.
• As soon as the option has been exercised, a contract for the sale and purchase of the Property in the form of a sale contract (Sale Contract) will immediately be taken to be operative and effective.
• If the Call Option is exercised:
(a) the Option Fee will be taken to be part of the deposit required under the Sale Contract; and
(b) any extension fees paid by the Grantee will be taken to be part of the deposit required under the Sale Contract
- If the Option is not exercised by the Grantee within the option period or extension periods (if applicable), the option fee and any extension fees will immediately be forfeited to the Grantor.
- The Grantee may, by notice nominate another person who will exercise the Call Option in place of the Grantee. In that event, the Notice of Exercise of Option and the Sale Contract will be amended by the parties to substitute the name on the nominee in the place of the Grantee in the Deed of Call Option and the Sale Contract will operate as though the nominee was at all times a party in place of the Grantee.
The Grantee paid monetary consideration for the Call Options (the Option Fee) and may exercise the Call Option at any time during the option period.
Annexed to the Deed of Call Option is a copy of the Sale Contract that will be entered into by the relevant Grantor and Grantee and/or nominee if the Call Options are exercised.
The Sale Contract provides that the sale will be input taxed on the basis that the sale is of 'eligible residential premises'. That is, the residential premises are not 'new residential premises' and for the purposes of the GST Act will be an input taxed supply.
A representative copy of a Sale Contract is included as part of this ruling request. The Sale Contract is based on the standard contract for the sale of land in the relevant state in which it is executed.
The parties being the Grantee and Entity C (Nominee) enter into a Nomination Deed. A representative copy of a Nomination Deed has been provided as part of this ruling request.
Under the Nomination Deed, the Grantee must nominate the Nominee as being entitled to exercise the Call Options to purchase the Property, subject to the Nominee paying the Grantee monetary consideration for the nomination (the Nomination Fee).
Once the Grantee and the Nominee enter into the Nomination Deed, the parties to the Sale Contract will be the Grantee and the Nominee.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-30(2)(b)
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