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You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1051770835563

Date of advice: 26 October 2020

Ruling

Subject: Supply of residential premises

Question 1

Is A the supplier, under paragraph 9-5(a), of the Property to B?

Answer

Yes.

Question 2

Is the supply of the Property to B made in return for consideration, under subsection 9-15(1), provided by B that is solely monetary?

Answer

Yes.

Question 3

If not, what is the non-monetary consideration for the supply of the Property?

Answer

N/A.

Question 4

Is the GST on the supply of the Property to B attributable, under section 29-5 of the GST Act, in full to the tax period in which the Tranche 1 and Tranche 2 deposit is provided by B?"

Answer

No.

Question 5

Is B making a creditable acquisition, under section 11-5, from A of the Property?

Answer

Yes.

Question 6

Is A making a creditable acquisition, under section 11-5, of development services for solely monetary consideration from C?

Answer

Yes.

Question 7

If so, is the creditable acquisition of the development services made by A on a progressive basis such that the input tax credit is attributed in accordance with section 156-10?

Answer

Yes.

Question 8

Is D making a creditable acquisition, under section 11-5, from B of obligations for B to provide social housing?

Answer

Yes.

Question 9

If so, is the creditable acquisition made by C for consideration, under paragraph 11- 5(c) and subsection 9-15(1), payable by C to B that is solely monetary?

Answer

Yes

Question 10

If not, what is the non-monetary consideration for the supply of the obligations to provide social housing?

Answer

N/A.

Relevant facts and circumstances

Copies of the following documents were provided with the ruling request:

·         Memorandum of Understanding;

·         Contract of Sale of Real Estate;

·         Funding Deed;

·         Project Annexure to Funding Deed;

·         Diagram of Transaction Structure; and

·         Project Delivery Agreement.

A is a state government entity that is the XXXX government's provider of project management and development services for construction projects and complex property developments. A has been registered for GST since 20XX.

C is a partnership between X Pty Ltd and Y Pty Ltd, commonly referred to as V. It is engaged in providing property development and related services in respect of S. C has been registered for GST since 20XX.

B is an unlisted Australian Public Company that is registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC). It specialises in the provision of affordable housing throughout metropolitan City, as a charitable housing provider. As a community housing provider, B has obligations to meet requirements set out in the Housing Act (Housing Act) relating to various matters, including tenancy application processes, rental limits, quotas, operating and maintenance standards and reporting. B has been registered for GST since 20XX and has charitable status for GST purposes since the same date.

D is a state government department that plans, funds and delivers community and social housing services in City, through the XYZ of Housing. For the purposes of this private ruling request, we have referred to D as the relevant entity through which the XYZ of Housing operates. It also administers the Housing Act and has ultimate Government responsibility to ensure requirements in the Housing Act are adhered to at S. D has been registered for GST since 20XX.

D and A are state government entities, C is a private sector entity and B is a not for profit entity. There are no common xyz among the participants.

Contractual background to the X project

On Y, A and B entered into a Project Delivery Agreement (the PDA) for the development of a village to provide accommodation and associated facilities for the athletes and officials attending the X (being the entire site and precinct in which the X was situated).

The X was located on unalienated Crown land. The previous reservation of this Crown land was revoked by the Y Act.

The PDA sets out the terms and conditions between the State (A) and the Developer (B) with respect to the delivery of the X project. Relevantly, the financial and commercial arrangements with respect to the project are set out in Part D of the PDA.

Following completion of the X, the former V is being redeveloped into the residential estate known as S. The obligations of the Developer to retrofit the X and complete the Project Works after the X Period in this regard are set out in the PDA.

A portion of the former V is to be used for the provision of social housing. Part Z of the PDA deals with the arrangements for the provision of social housing and clause Q sets out provisions for the appointment of a not-for-profit operator of the social housing. Specifically, Q states:

Q Not for Profit Operators

TheDeveloper may submit a proposal to the State for ownership and operation of Social Housing Dwellings in the Post Games Mode Development other than by the State. The State must consider the proposal, acting reasonably, and respond promptly to the Developer.

A proposal would not be acceptable to the State unless:

·         the proposed owner and operator is a not-for-profit entity;

·         the Developer demonstrates that there is no additional cost to the State under the proposal; and

·         the proposal is consistent with the State's policy on Social Housing prevailing at the time.

Social Housing is defined in the PDA to mean, among other categories, 'public housing to be constructed by the Developer (B) and owned and operated by the State' and 'housing operated or owned and operated by not-for-profit community organisations and occupied by persons who are eligible for housing assistance from the State'.

Legislative background to the V project

The V was previously a nominated project under the Project Development and

V Act under which:

·         A was specified as the facilitating agency; and

·         the Minister for Major Projects was specified as the responsible Minister in respect of the project.

On X, A merged with P to form a new government entity - A.. As a consequence, A's X ongoing projects, including the S site on which S is located, came under the control of A.

Section X of the D provides for reciprocal arrangements with public sector agencies. Specifically, subsection W indicates that a facilitating agency for the purpose of a nominated project may enter into an agreement or arrangement with a Minister, government department or public body concerning:

a.    W(1)(a) - the carrying out by the facilitating agency and the public sector agency of any of their respective functions; and

b.    W(1)(b) - the carrying out or providing by the facilitating agency for the public sector agency, or by the public sector agency for the facilitating agency, of any works or services.

Subsection K of the D provides that the responsible minister may recommend to the Governor in Council (GIC) the grant, sale or disposition of Crown land, on any terms (including consideration) that the responsible Minister considers appropriate.

Subsection L provides that the GIC may grant Crown land to A. Section M of the D provides that A may dispose of its interest in land. Under section N of the D, DV may enter into an agreement with any person in anticipation of that person becoming an owner of land concerning the use or development of the land.

Stage Z S

On X B entered into an agreement with the O for the provision of affordable housing in return for the procurement of the grant in fee simple of social housing (units on the V site).

Subsequent to that development, and to fulfil remaining obligations to provide social housing under various historical instruments including the PDA, B and C have agreed to enter into a further arrangement that was originally known to the project participants as T.

The proposal originally put forward by B and C (then known as P) pursuant to clause DX of the PDA (the original DX Proposal), broadly involved the development of T, comprising X newly constructed apartments - X of which were to be funded by the State via the payment procedures contained within the PDA and X of which were to be funded by B.

In the intervening period since the original DX Proposal was put forward by B and C, the parties entered into further negotiations with A and amended the proposal in light of planning scheme amendments that allowed for greater density on the site. The deal is now for X social housing apartments to be located on land known as Stage X of the site rather than for X social housing apartments that were to be located on land then known as T of the site.

The details of the arrangements for the S deal can be found in the Memorandum of Understanding S - SH Program (MOU) was entered into by B (as Developer) and C (as Purchaser). The Background to the MOU states:

a)    A and the Developer are parties to the Project Delivery Agreement for the delivery of the Project.

b)    The Purchaser is preparing a response to the Request for Proposal (RFP) in respect of the Proposal.

c)    The Developer and the Purchaser agree to continue to negotiate a commercial arrangement for the delivery of the Development on the terms of this MOU.

The MOU contains the following definitions:

a)    Proposal: means the proposal submitted or to be submitted to the DoH by the Purchaser in response to the RFP to acquire S or T of the Project for the Price and operate the properties as social housing

b)    Price: is respect of the S Building, means $X exclusive of GST

c)    S Building: means a residential apartment building comprising X dwellings located on the S Site substantially in the form set out in the S Concept Design Plans.

Schedule 1 to the MOU is the Draft Terms Sheet, which documents the additional terms for discussion in relation to the contract of sale. The following items of the Draft Terms Sheet are of note for the purpose of this private binding ruling request:

·         Item A Parties: lists A as the Vendor, C as the Developer and B as the Purchaser;

·         Item B Conditions subsequent: specifies that the contract of sale is subject to obtaining the Crown Grant by the Crown Grant Date (among other conditions);

·         Item C Interaction with the PDA: C acknowledges that B and C entered into the PDA and agrees to abide by its obligations under the PDA and B makes certain acknowledgements in relation to the PDA;

·         Item D Social Housing: sets out certain terms with respect to the social housing, including that the parties will not enter into the Contract of Sale unless A confirms it is satisfied that all dwellings within the property meet the definition of 'social housing' under the H Act and the PDA;

·         Item E Crown Grant: B acknowledges that A will obtain the Crown Grant for the property and C must not commence construction works until the Crown Grant has been obtained;

·         Item F GST treatment: XX acknowledges that A is seeking a private binding ruling to verify the GST treatment of this transaction; and

·         Item G Other conditions with the Vendor: B acknowledges that due to the tripartite nature of the Contract of Sale, there will be additional conditions to be agreed between C and A.

The MOU was formalised by A (as Vendor), B (as Purchaser) and C (as Developer) entering into an agreement known as the Contract of Sale of Real Estate dated X (Contract) The pertinent parts of that Contract are as follows:

·         The Contract is for Land known as proposed Crown Allotment Z contained in Y within Parish of J being known as S;

·         Price payable for the Land is $X, which is comprised of the Tranche 1 Deposit of $X, the Tranche 2 Deposit of $X (together defined as the Deposit in Special Condition W) and the Balance of $X;

·         Special Condition U is in relation to development of the Land and, in particular, the parties acknowledge and agree that:

-        A is the owner of the Land (clause 4U1.1);

-        B wishes to acquire the Land from A with the completed Building developed on the Land (clause U.1.2);

-        C has the expertise to procure the development of the Building on the Land (clause U.1.3);

-        under the PDA C has obligations to A to develop the Land (clause U.1.4);

-        the Price payable under the Contract is consideration for the transfer of the Land by A and there is no separate consideration payable by B to C (clause Q).

As set out in Special Condition Z, the terms relating to the supply of the Land by A to B are set out in Part B of the Special Conditions and the terms relating to the supply of the development services by C to A are set out in Part C of the Special Conditions;

Under Special Condition L, B warrants that it is a Registered Housing Association (RHA), the X dwellings which will be developed on the land as part of the Project will be used by B in accordance with its obligations as a RHA and the X dwellings which will be developed on the land as part of the Project will be Social Housing Dwellings;

Special Condition R of the Contract is with respect to GST;

Under Part B (with respect to the supply of the Land by A to B):

·         A agrees to sell and B agrees to buy the Property for the Price and on the terms set out in the Contract (Special Condition Y);

·         B acknowledges, and the parties agree, that C is responsible for and A is not responsible for the construction, condition or delivery of any structures or inclusions on the Property and A is released from all obligations and liabilities in connection with the construction, condition or delivery of such structures or inclusions (Special Condition Q) and all payments under the Contract must be made to A or as A directs (Special Condition F);

·         B must pay the Deposit (being the Tranche 1 Deposit and the Tranche 2 Deposit) to A's Legal Practitioner to be held by A's Legal Practitioner (Special Condition V);

·         B acknowledges receiving a notice specifying the particulars referred to in section 27 of the Sale of Land Act 1962 on or before the Day of Sale (s27 Notice) (with respect to release of deposit moneys to the vendor) and B agrees to the release of the Tranche 1 Deposit to DV on the Day of Sale (being the date of the Contract) (Special Condition D);

·         B must do all things required under the H Act to enable registration of a XYZ's Interest in relation to the Property immediately following Settlement (Special Condition E); and

·         Settlement is conditional on the Crown Grant Order being obtained and the Crown Grant being granted (Special Condition F). Further, A and C will comply with the process for procuring the Crown Grant in Part C of the PDA and must take all reasonable steps to procure the Crown Grant Order as soon as possible after the Day of Sale (Special Condition G);

·         Under Part C (with respect to the supply of the development services by C to A):

·         A appoints C to develop the Project on the terms set out in the Contract (Special Condition H);

·         In consideration of the Development Fee, C agrees to act as developer and be responsible for the control, management, co-ordination and supervision of all activities of the Project (Special Condition I);

·         The amounts payable by A to C (the Development Fee) comprises (Special Condition J):

·         the Social Housing Payments on a periodical basis (as set out in the PDA). Per Special Condition K, Social Housing Payments has the meaning given under clause W of the PDA;

·         $X within 14 days after Settlement; and

·         Additional amounts due to an increased Cost in connection with the development of the Project caused by a variation requested by the Purchaser or the Purchaser breaching the Contract.

·         A is required to pay C the Social Housing Payments for X Social Housing Dwellings which are to be constructed by C as part of the Building and the Social Housing Payments are to be paid on a periodical basis. The amount of the Social Housing Payments is not to exceed the amount of the Tranche 1 Deposit of $X prior to Settlement (Special Condition K);

·         C must ensure that the Builder constructs the Building in accordance with Part E of the PDA.

Separately to the MOU and the Contract of Sale, B and the XYZ of Housing entered into a Funding Deed dated X and Project Annexure to the Funding Deed (Project Annexure). The Project Annexure sets out the documentation of the project and forms part of the Funding Deed entered into by the XYZ of Housing and B. The following terms of the Project Annexure are relevant:

·         Designated Property means X proposed apartments, A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, P, Q and R to be constructed as part of the development known as S, more particularly described as Proposed Crown Allotment X contained in Y within the Parish of J generally in accordance with the plans;

·         Performance Standards (definition in the Funding Deed): means the performance standards determined from time to time in accordance with Section 93 of the Housing Act;

·         Principal Sum means $X (exclusive of GST) or such other sum as is required to satisfy the definition of the "Social Housing Payments" in respect of the Designated Property in accordance with the Project Delivery Agreement;

·         Clause P: Project description

-        In this Project Annexure the "Project" is the purchase of the Designated Property in accordance with the development schedule attached to this Project Annexure.

-        Following settlement, the dwellings comprising the Designated Property are to be tenanted and managed in compliance with the Performance Standards.

·         Clause Q: Funding

-        The XYZ confirms that it has entered into an arrangement under which it has or will receive the Principal Sum from A prior to the provision of funding to the Agency under this Project Annexure.

-        Subject to the receipt of the Principal Sum by the XYZ, the XYZ shall pay the Principal Sum to the Agency no later than the Milestone Date to enable the payment of a non-refundable deposit to A in respect of the Agency's purchase of the Designated Property. The Agency must not use the Principal Sum for any other purpose.

Clause B: Acquisition process, planning & construction

The parties acknowledge and agree:

The transactions contemplated for the execution of S, as per the MOU, the Contract and the Funding Deed (including the Project Annexure to the Funding Deed), are summarised below:

There is no separate construction contract between C and A. Instead, the arrangement between A and C for the development of the Property is governed by the PDA between the State and C and the Contract of Sale between A, C and B referred to above.

The proposed project timeframes are as follows:

Following a previous GST Large Specific audit relating to a T property transfer (the Audit), the ATO issued a Position Paper dated D (the position Paper) which concluded the supply of the Property by A was a taxable supply for which B (in the absence of monetary consideration) provided non-monetary consideration to A in the form of entering into obligations to provide social housing.

The parties to the present arrangement previously entered into an arrangement in F that was known as 'S10' that involved the development of X social housing units. That arrangement was presented to the ATO in a private ruling request dated R. That arrangement did not proceed for various commercial reasons including amendments to the planning scheme which allowed for greater density on the site. The previous private binding ruling request was withdrawn in E.

Unlike the arrangement considered by the Commissioner during the Audit, S involves the payment of substantial amounts by D to B as consideration for entering into obligations in connection with its provision of social housing by B to A for the acquisition of social housing.

B will only use the Property to make supplies of accommodation for consideration that is less than 75% of the market value.

A's role as facilitating agency has not changed since the date of the Position Paper.

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 9-15

A New Tax System (Goods and Services Tax) Act 1999, section 11-5

A New Tax System (Goods and Services Tax) Act 1999, section 29-5

A New Tax System (Goods and Services Tax) Act 1999, section 38-250

A New Tax System (Goods and Services Tax) Act 1999, section 99-10

A New Tax System (Goods and Services Tax) Act 1999, section 156-10

A New Tax System (Goods and Services Tax) Act 1999, section 176-1

Reasons for decision

Question 1

IsAthe supplier, under paragraph 9-5(a), of the Property to B?

A is nominated as the facilitating entity of the government under the BCD and is therefore the government entity that has control of the relevant Crown land for S.

As the entity which transfers legal title in the Property to B upon completion, we consider A to be the entity making the supply. This is confirmed by Special Condition X of the Contract, which states that A agrees to sell and B agrees to buy the Property for the Price on the terms set out in the Contract.

As the supplier, A has GST liability for a taxable supply of the Property upon transferring the Crown Grant.

Question 2

Is the supply of the Property to B made in return for consideration, under subsection 9-15(1), provided by B that is solely monetary?

Special Condition Y of the Contract states that A will make the supply of Property in return for monetary payment of $X (exclusive of GST). This amount payable by B to A is consideration under paragraph 9-15(1)(a) of the GST Act.

The payment of that amount is 'in connection with' the supply of the Property by A on the basis there is a 'substantial relationship' between the receipt of the payment and the transfer of the Property by DV. This is in accordance with Berry v FC of T (1953) 89 CLR 653, which was endorsed by the Commissioner at paragraph 70 of Goods and Services Tax Ruling GSTR 2001/6 (Goods and services tax: non-monetary consideration (GSTR 2001/6).

We consider that the arrangement for S differs from the arrangement the subject of a previous audit and the Position Paper because in this case there is the payment of a substantial amount of solely monetary consideration by B to A for the acquisition of the Property. The payment of $X (excluding GST) to B is consideration for entry into obligations relating to the provision of social housing. The separate payments of substantial monetary amounts by D to B for entry into the social housing obligations does not form any non-monetary consideration in relation to the supply of the Property by A to B. We consider them to be separate, distinct supplies within their own right, even though they fall under the same arrangement.

Paragraph 81 of GSTR 2001/6 (Goods and services tax: non-monetary consideration) states that a thing must have an economic value and independent identity provided as compensation for the making of the supply for it to be treated as a payment for a supply. Based on the facts in this case, we do not consider such a separate thing exists and that the consideration is solely monetary.

Question 3

If not, what is the non-monetary consideration for the supply of the Property?

N/A

Question 4

Is the GST on the supply of the Property to B attributable, under section 29-5 of the GST Act, in full to the tax period in which the Tranche 1 and Tranche 2 deposit is provided by B?"

Under the Contract for the supply of the Property, the deposit is to be payable in two tranches upon execution of the Contract, being the Tranche 1 Deposit of $X and the Tranche 2 Deposit of $Y. The balance of the of the Property Price for the supply of the Property of $Z will be payable upon settlement.

Pursuant to subsection 29-5(1) of the GST Act, GST payable on a taxable supply is attributable to the earlier of the tax period in which:

(a)  any of the consideration for the supply is received; or

(b)  an invoice is issued for the supply.

Under the normal rules, A would have a GST liability for one-eleventh of the total amount payable for the supply of the Property to B in the first tax period in which an invoice for the supply is issued or any consideration for the supply is received.

In this case, we concur with your view that the amounts paid to A by B prior to settlement are a deposit for GST purposes and therefore Division 99 applies.

Subsection 99-10 provides:

(1)  The GST payable by you on a taxable supply for which the consideration is a deposit that was held as security for the performance of an obligation is attributable to the tax period during which the deposit:

(a)  is forfeited because of failure to perform the obligation; or

(b)  is applied as all or part of the consideration for a supply.

(2)  This section has effect despite section 29-5 (which is about attributing GST for taxable supplies).

Paragraph 20 of Goods and Services Tax Ruling 2006/2 (Goods and services tax: deposits held as security for the performance of an obligation) provides that for a payment to be considered a 'security deposit' for the purposes of Division 99, it should have the following characteristics:

Applying the above to your situation, we consider the amounts paid by B to A prior to settlement to be a deposit for the following reasons:

·         it is an honest attempt to bind the bargain that has been struck between struck between A and B for the sale of the Property;

·         it will be held by A to secure the performance of B's obligations to proceed with the purchase of the Property from A;

·         it is the parties' mutual intention that the amount is at risk of forfeiture to A if B fails to perform its obligations to proceed with the purchase;

·         it is a reasonable amount, being approximately 15% of the total monetary consideration, taking into account the following factors:

-        the degree of risk to A if the supply of the Property does not proceed to settlement;

-        the timing of payment, being on execution of the contract;

-        the risk of loss to A given the back-to-back obligations it has to C under Part D of the Contract, thereby exposing A to potential cash flow problems if the sale to B does not proceed; and

-        the unique circumstances arising from an additional Property yield having been agreed between A and B to accommodate B's Leverage Obligations.

Because the payments made by B to A are a deposit, Division 99 operates to attribute the GST to the tax period in which settlement occurs.

Question 5

Is B making a creditable acquisition, under section 11-5, from A of the Property?

Section 11-5 sets out what a creditable acquisition is:

You make a creditable acquisition if:

(a)  you acquire anything solely or partly for a creditable purpose; and

(b)  the supply of the thing to you is a taxable supply; and

(c)   you provide, or are liable to provide, consideration for the supply; and

(d)  you are registered, or required to be registered.

Under section 11-5, B makes a creditable acquisition of the Property from A and is entitled to recover the GST incurred on such acquisition, if the acquisition is made for a creditable purpose and the other requirements are satisfied. B will make the acquisition of the Property for a creditable purpose to the extent that the acquisition is made in carrying on its enterprise and does not relate to making supplies that would be input taxed.

B has made the acquisition of the Property from A in carrying on its enterprise of providing social housing to tenants by way of lease.

B is an endorsed charity for GST purposes, being an entity that is endorsed as a charity under subsection 176-1(1). It is registered as a charity with the Australian Charities and Not-for-profits Commission effective from Y.

B makes supplies of residential accommodation in the Property acquired from A to tenants by way of lease for reduced consideration (social housing). Such supplies are GST-free under section 38-250 on the basis that they are made for consideration that is less than 75% of the GST inclusive market value for the supplies or the cost to XX of providing the accommodation. Given the GST-free treatment, the supplies of residential premises made by B to tenants by way of lease are not input taxed supplies of residential premises under the normal rules. For S, it is proposed that the supplies of accommodation by B to tenants under the arrangement will be GST-free under section 38-250(1) on the basis that the consideration is less than 75%of the market value. Whilst the market value of the residential rental income to be derived from leasing the units to tenants is unavailable at this time, B has confirmed that the units will be leased for rent that is less than 75% of the market value (whatever that market value is at the time) and the supplies will therefore be GST-free under section 38-250(1).

We concur with your view that B's acquisition of the Property from A is a creditable acquisition as it is incurred in carrying on its enterprise and the negative limb of the of the creditable purpose test regarding acquisitions that relate to making input taxed supplies [in paragraph 11-15(2)(a)] will not apply to the acquisition of the social housing. B is therefore entitled to fully recover the GST incurred on the acquisition of the Property from A provided it holds a valid tax invoice.

Question 6

Is A making a creditable acquisition, under section 11-5, of development services for solely monetary consideration from C?

A makes a creditable acquisition of the development services from C and is entitled to recover the GST incurred on such acquisition, if the acquisition is made for a creditable purpose and the other requirements are satisfied.

A has engaged C to design and construct the units and approves progress claims made by C. It is contractually liable to provide payment for the development services supplied by C. While the agreement for the provision of development services is contained within a broader arrangement involving the acquisition of the property by B and funding from D to B, these other arrangements (supplies), are separate to, and not consideration for the supply of the development services from C to A. The consideration for the development supply is the payment of $X.

A makes the acquisition of the development services to allow it to deliver the S project in accordance with the Development XXX Act 1993 and the Project Delivery Agreement by supplying the Property to B. Such acquisition is made by A in carrying on its enterprise of delivering major social infrastructure project for the State government and is for a creditable purpose, pursuant to section 11-5 of the GST Act.

Question 7

If so, is the creditable acquisition of the development services made by A on a progressive basis such that the input tax credit is attributed in accordance with section 156-10?

Subsection 156-10 provides for the attribution of input tax credits on progressive or periodic acquisitions:

(1)  The input tax credit to which you are entitled for a creditable acquisition that is made:

(a)  for a period or on a progressive basis; and

(b)  for consideration that is to be provided on a progressive or periodic basis;

is attributable, in accordance with section 29-10, as if each progressive or periodic component of the acquisition were a separate acquisition.

A is acquiring development services from C on a progressive basis, with the term of construction to be over a number of months and progress claims submitted by C to A as monthly progress payments s set out in the Project Delivery Agreement. The effect of this agreement is that payment of Social Housing Payments portion of the Development Fee is paid by A to C on a periodical basis, in accordance with paragraph (a) of Special Condition X, and the balance of the Development Fee (other than adjustments) being the amount of $X is paid within 14 days after Settlement.

As A is required to make progressive payments to C of the Social Housing Payments portion of the Development Fee (not exceeding the Tranche 1 Deposit) during the construction phase of the Social Housing Dwellings upon receipt of the progress claims, we consider that A's input tax credit entitlement is attributable to the earlier of the tax period in which an invoice for each separate component of the acquisition is received or the progress payment for the component is made.

Question 8

Is D making a creditable acquisition, under section 11-5, from B of obligations for B to provide social housing?

For the reasons set out below, we are of the view that D is making a creditable acquisition of the obligations for B to provide social housing.

B has entered into obligations with ABC to provide social housing at the Property acquired under S and to meet certain performance standards under the Housing Act. We are of the view that the entry into such obligations by B is a separate supply by B to D from the sale of the Property by A to B for GST purposes. The supply of such obligations by B is a taxable supply that is made for consideration in the form the significant, solely monetary amount payable by D to B, which is calculated in accordance with clause U of the PDA.

The acquisition of the obligations by D will be made in carrying on its enterprise in relation to the delivery of policies, programs and services that support and enhance the wellbeing of XXXX, including through the provision of social housing.

Question 9

If so, is the creditable acquisition made by C for consideration, under paragraph 11- 5(c) and subsection 9-15(1), payable by C to B that is solely monetary?

D will provide solely monetary consideration of $X (plus GST) to B in return for B entering into obligations with D to provide social housing.

D does not provide anything further to B in connection with or in relation to the entry into the obligations by B.

Paragraph 81 of GSTR 2001/6 (Goods and services tax: non-monetary consideration) states that a thing must have an economic value and independent identity provided as compensation for the making of the supply for it to be treated as a payment for a supply.

Dis not providing anything with an independent identity or economic value to B in relation to its supply of obligations to provide social housing.

Question 10

If not, what is the non-monetary consideration for the supply of the obligations to provide social housing?

N/A

Reasons for Decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Note: Unless otherwise stated, the legislative references referred to in the Reasons for Decision are to the GST Act.

In this reasoning, please note:

·         all legislative terms of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) marked with an asterisk are defined in section 195-1 of the GST Act

·         all reference materials referred to are available on the Australian Taxation Office (ATO) website ato.gov.au

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