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Edited version of your written advice
Authorisation Number: 1012919530675
Date of advice: 18 December 2015
Ruling
Subject: GST and the supply of a nominee right
Question
Was the supply by Entity A of the nominee right to call options over the Properties to the Nominees, a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and subject to GST?.
Answer
No. The supply by Entity A of the nominee right was not subject to GST as it was an input taxed supply. Further, the Nominees are not entitled to an input tax credit in relation to their acquisition of the right.
Relevant facts and circumstances
Entity A is registered for GST.
The Nominees entered into a Nomination Agreement with Entity A (the Grantee) to appoint the Nominees as the Nominee under the call options for the Properties.
The Nominees paid Entity A the Nomination Fee plus GST.
Entity A issued the Nominees a tax invoice.
The Nominees exercised the call option and purchased the Properties.
The Properties are residential premises (they are not new residential premises or commercial residential premises) for GST purposes.
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 Section 9-10
A New Tax System (Goods and Services Tax Act) 1999 Subsection 9-30(2)
A New Tax System (Goods and Services Tax Act) 1999 Section 40-65, and
A New Tax System (Goods and Services Tax Act) 1999 Section 195-1.
Reasons for decision
In this reasoning, please note:
• unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all terms marked by an *asterisk are defined terms in the GST Act
Entity A has made a supply of the grant of the right to purchase the Properties to the Nominees for the Nominee Fee pursuant to the Nomination Agreement.
To be a taxable supply, a supply must meet all of the requirements of section 9-5 which states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with the indirect tax zone; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
All the requirements of section 9-5 are satisfied. There are no GST provisions whereby the supply would be GST-free. The relevant issue is whether the supply by Entity A was input taxed.
Subsection 9-30(2) states:
A supply is input taxed if:
(a) it is input taxed under Division 40 or under a provision of another Act; or
(b) it is a supply of a right to receive a supply that would be input taxed under paragraph (a).
Of relevance is whether the supply of the Properties to which the right relates is input taxed.
Section 40-65 provides that a sale of real property is input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation and is not commercial residential premises or new residential premises.
The Properties meet the definition of residential premises contained in section 195-1 which provides that 'residential premises' means land or a building that:
(a) is occupied as a residence or for residential accommodation, or
(b) is intended to be occupied and is capable of being occupied, as a residence or for residential accommodation.
The Properties do not meet the definition of new residential premises, nor do they meet the definition of commercial residential premises.
As the supply of the residential premises would be an input taxed supply, the supply by Entity A of the grant of the right to purchase the residential premises to the Nominees was an input taxed supply pursuant to paragraph 9-30(2)(b).
As the supply of the right was not a taxable supply, Entity A is not liable for GST in relation to their supply and the Nominees are not entitled to an input tax credit in relation to their acquisition.
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