1051779359440 | Legal database

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Edited version of private advice

Authorisation Number: 1051779359440

Date of advice: 19 January 2021

Ruling

Subject: Non-monetary consideration and calculation of the margin on taxable supplies of subdivided lots

Question 1

Does A make any taxable supply to the previous owner of the land (Landowner) in relation to its acquisition of a specified parcel of land (the Land)?

Answer

No.

Question 2

Does the consideration provided by A to the Landowner for its acquisition of the Land include both monetary and non-monetary components?

Answer

No.

Question 3

Is both the monetary and non-monetary consideration provided by A to the Landowner the relevant consideration for its acquisition of the Land in accordance with subsection 75-10(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Not applicable because of the answer to question 2.

Relevant facts and circumstances

The following is background information about the development regulations in a specified State (the State) and the rezoning of land at a specified location within the State (the Specified Area):

• The relevant State Act and regulations establish the planning and development system framework for the State, and the processes required to be followed within that framework.

• The relevant State Act and regulations require the relevant authorities to ensure their broader development plans are consistent with the land-use policies and directions.

• A few years ago, the Specified Area was rezoned for urban development.

• Following the rezoning, the relevant authorities developed a specified plan (the Specified Plan) which outlines the relevant authorities' strategy on how development of the Specified Area would be staged and the identification of the location of infrastructure such as recreation areas and roads. The Specified Plan was endorsed on a specified date.

• The Specified Plan serves as a tool for the assessment of development applications made by developers and therefore serves as a regulation mechanism of the use of land within the Specified Area.

Initial Agreement

The Initial Agreement was entered into between a specified State Authority (C) and a number of developers, including developer B (B).

The Initial Agreement was entered into prior to the rezoning of the Specified Area and was subject to adoption of the Specified Plan.

The Initial Agreement provides:

• The developers either own or have agreements with the owners of the land for the purchase and development of all the land in the Specified Area.

• The developers wish to develop their land for residential and commercial purposes.

• The developers acknowledge that the development of the Specified Area will over time require the construction or expansion of certain transport infrastructure as described in the Initial Agreement.

• If the Specified Plan is adopted, then:

- the parties agree to facilitate the development of the required infrastructure as the Specified Area is developed

- the developers agree to bear the cost of construction or expansion of certain infrastructure specified in the Initial Agreement

- the developers acknowledge that they will be required to provide certain infrastructure under the relevant State Act as part of future development applications relating to the development of their land

- C agrees to bear the cost of construction or expansion of certain infrastructure specified in the Initial Agreement, and

- subject to certain further matters to be agreed on in the future.

• The developers will contribute to the development of the required infrastructure at a rate of $X per a specified area of land (the Specified Rate).

• The timing of the payment of the developer contribution (Specified Amount) is as set out in the Initial Agreement.

• The Specified Amount is payable only once for any given area of land.

• The parties agree to cooperate to enter a future detailed agreement or other suitable binding arrangement governing the development and funding of all of the required infrastructure as the Specified Area is developed after the adoption of the Specified Plan in accordance with the Initial Agreement.

• The parties agree that it is necessary to enter arrangements or submit to binding obligations dealing with other matters associated with the funding and development of the required infrastructure in the future.

Specified Plan

The Specified Plan was endorsed by the relevant authorities a few years after the Initial Agreement was entered into.

The aim of the Specified Plan is to ensure that necessary infrastructure is provided to support the growing community and assist in delivering the outcomes identified.

Agreement to purchase the Land

After the endorsement of the Specified Plan, A agreed to purchase the Land from the Landowner.

The Land is situated within the Specified Area.

Infrastructure Deed

After the endorsement of the Specified Plan, B entered into the Infrastructure Deed (the Deed) with C.

The Deed refers to B as the Developer and provides that:

• The Developer owns or has entered into an agreement or agreements for the purchase and/or development of the land described in the Deed.

• The Developer intends to develop the Land for residential and or commercial purposes.

• The parties acknowledge that the development of the Specified Area will over time require the construction or expansion of certain infrastructure as described in the Deed.

• The Developer agrees to contribute to the cost of some of the required infrastructure, as set out in the Deed.

• C agrees to bear the cost or facilitate the construction of some of the required infrastructure as set out in the Deed.

• C agrees to facilitate the construction of the required infrastructure as the Specified Area is developed in accordance with the terms of the Deed.

• The parties agree that it is a condition precedent to the operation of the Deed that:

- all owners or persons who have entered into an agreement or agreements for the purchase and or development of the Land within the Specified Area must sign a deed on exactly the same terms and conditions as the Deed, and

- the owner of the land must execute and deliver to C a signed encumbrance in respect of the land to secure the performance of the specified clauses of the Deed.

• The Developer will, in respect of the relevant portion of land, contribute to the required infrastructure by paying to C the Specified Amount and/or completing approved works for that portion of the land.

• The Developer will pay or contribute to the Specified Amount in respect of the relevant portion of land if:

- The Developer lodges a plan of division in relation to that portion of the land - prior to or on the same date as lodgement for deposit of a plan of division at the Lands Titles Office, or

- The Developer obtains development approval under the relevant State Act for a development, on that portion of the land - within a specified time of the grant of that development approval.

• The Developer is:

- only liable to pay or contribute to the Specified Amount once in relation to any area of the land; and

- not liable to pay or contribute to the Specified Amount in relation to an area of the land if the Specified Amount has already been paid or contributed to in full by another person in relation to that same area of the land.

• The Specified Amount for any portion of the land is calculated by multiplying the area of that portion of the land in the plan of division or the area of the site of the development that is within the Specified Area by the Specified Rate.

• The Specified Rate is $X per a specified area of land.

• The parties acknowledge that the appropriate timing and sequence of the construction of the required infrastructure is as described in the Deed.

• The Developer may only assign its rights and obligations under the Deed with the written approval of C.

• It is a condition precedent to the Deed that the Developer agrees to execute an encumbrance in accordance with the encumbrance attached to the Deed (Encumbrance) (and if the Developer is not the owner of the Land, to obtain from the owner of the Land an executed Encumbrance) and to provide the executed Encumbrance to C.

• The Developer must:

- sign (or obtain from the owner of the Land an executed encumbrance) and deliver the Encumbrance to C as soon as reasonably practicable after the execution of the Deed, and

- secure all consents required under the Deed at the time of execution of the Encumbrance.

• Prior to assigning its rights and obligations under the Deed, or entering a contract for the sale of the land or portion of the land, the Developer must obtain from the prospective assignee or purchaser, a deed executed by the prospective assignee or the purchaser on the same terms as the Deed, and an encumbrance on the same terms as the Encumbrance attached to the Deed and provide the executed deed and executed encumbrance to C.

• The Deed may be terminated by C at any time if the Developer fails to fulfil the obligations under the Deed.

• The Deed may be terminated by the Developer if the Developer ceases to have any legal or equitable right to purchase or develop the land.

• The term of the Deed is the later of:

- a period of X years or

- the completion of all the required infrastructure.

• The Deed defines the term 'Developer' as the owner of the land or a person who has entered into an agreement or agreements for the purchase and or development of the land within the Specified Area.

In addition to the Land in question, the Deed lists a number of other parcels of land which are covered under the Deed. B is the developer of all the land listed in the Deed. However, A only owns the Land.

Exchange of Contract for the Sale and Purchase of Land

Shortly after the execution of the Deed, A formalised its agreement with the Landowner to purchase the Land via a contract (Land Contract).

The Landowner was not registered or required to be registered for GST at the time of sale.

The Purchase Price of the Land under the Land Contract was $Y.

The Land Contract acknowledges the proposed Encumbrance and provides that a Memorandum of Encumbrance is to be granted by A in favour of C.

The Land Contact provides:

• The Landowner warrants that immediately before settlement the Land shall not be subject to any Encumbrance.

• To the best of the Landowner's knowledge no notice has been issued by any relevant government authority in respect of the Land which has not been complied with or disclosed in writing to A before the execution of the Land Contract.

• The Land is sold subject to any restrictions under planning, development or heritage laws, and any estates or interest by force of statute affecting the Land.

• Prior to its execution of the Land Contract, A had exercised due diligence and had:

- examined all information relevant to the risks, contingencies and other circumstances having an effect on its purchase of the Land

- satisfied itself as to the nature and effect of laws restricting the use or enjoyment or development of the Land, and

- satisfied itself as to the value of the Land from its own independent valuations and reports.

Settlement of the Land Contract

The Title Register Search and the Certificate of Tile show that the title to the Land was issued to A on a specified date, and the title of the Landowner to the Land was cancelled on that same date.

Memorandum of Encumbrance

After the settlement of the Land Contract, A executed the Memorandum of Encumbrance in accordance with Section 127(1) of the Corporations Act 2001.

The Memorandum of Encumbrance provides:

• Certificate of tile being encumbered: The Land

• Encumbrancer: A

• Encumbrancee: C.

The Memorandum of Encumbrance defines the Deed as the deed entered into between A as the Encumbrancer and C as the Encumbrancee for the payment of the Specified Amount by the Encumbrancer to the Encumbrancee to which it is a condition precedent that the Encumbrance is registered on the Certificate of Title on the Land at the Lands Titles Office.

The Memorandum of Encumbrance provides that A encumbers the estate and interest in the Land for the benefit of C subject to the encumbrances and other interests as shown hereon with the sum of money (Specified Amount).

Under the Memorandum of Encumbrance, the Specified Amount is calculated by multiplying the area of land in the plan of division or the site of development by the Specified Rate.

The Specified Rate is $X per specified area of land.

The Memorandum of Encumbrance provides that the Encumbrance creates a charge over the Land and the Encumbrancer must pay the Specified Amount to the Encumbrancee during the term of the Encumbrance:

• In the case of land division within the Specified Area - prior to or on the same date as lodgement for deposit of a plan of division at the Lands Titles office.

• In the case of the development within the Specified Area - within a specified period of the grant of the development approval for that development.

The Encumbrance will continue to apply to:

• the balance of the Land not subject to a plan of division or development approval, or

• any portion of the Land for which the relevant Specified Amount has not been paid to the Encumbrancee.

The Memorandum of Encumbrance provides that the Encumbrance is binding on the successors of the Encumbrancer. However, the Encumbrancer must not Dispose of the Land or any part of the Land to any person unless:

• the Encumbrancer first obtains the grant by that person of an encumbrance in the same form and the same effect as the Encumbrance which binds that person and is for the benefit of the Encumbrancee, and

• the Encumbrance is registered on the Certificate of Title of the Land immediately after the discharge of this Encumbrance.

The Memorandum of Encumbrance provides that if the Encumbrancer breaches any covenant of the Memorandum of Encumbrance and the Encumbrancer fails to remedy the breach, then the Specified Amount becomes a debt due and payable. If the outstanding Specified Amount is not paid by the Encumbrancer to the Encumbrancee then the Encumbrancee may choose to seek:

• an injunction preventing or restraining any breach of the covenants in the Encumbrance

• an injunction preventing any development to proceed in respect of that portion of the Land, or

• damages for any such breach.

Under the Memorandum of Encumbrance, the Encumbrancer and its successors in the title will be successively released and discharged from the covenants contained in the Encumbrance upon ceasing to be registered as the proprietor of such portion of the Land. That is, the covenants will be binding only upon the registered proprietor for the time being of such portion of the Land.

Under the Memorandum of Encumbrance, the Encumbrancer acknowledges for itself and its successors in title that:

• the covenants in the Encumbrance are entered into and undertaken for the purposes of putting into effect the Deed.

• the Encumbrance is imposed as part of a scheme for the regulation of development of land within the Specified Area, and

• the covenants of the Encumbrance are for the benefit of both the Encumbrancee and for the benefit of every other allotment within the Specified Area.

The Memorandum of Encumbrance provides that upon receiving both the Specified Amount in respect of that portion of the Land and a request from the Encumbrancer to discharge the Encumbrance in respect of that portion of Land, the Encumbrancee will execute and register a partial discharge or discharge (as the case may be) of the Encumbrance in respect of that portion of Land.

Registration of Encumbrance on the Certificate of Title

A few weeks after the execution of the Memorandum of Encumbrance, the Encumbrance was registered on the Certificate of Title of the Land at the Lands Titles Office on a specified date.

Land division and sale

Development approval for a specified number of allotments was granted on a specified date.

The land division commenced in a specified year. The Land is to be developed in a specified number of stages.

The sale of the subdivided lots commenced in a specified year and there were settlements in a specified financial year.

As at a specified date, there had been a specified number of lots sold in the development.

The remaining Land is currently being developed and sold.

Specified Amount

C issues an invoice for the Specified Amount to A at the completion of each development stage. The invoice must be paid before the land division is cleared for title.

Details of the Specified Amount paid to C as at a specified date were provided to us.

A sample tax invoice for the Specified Amount was provided. The tax invoice is issued by C in respect of a specified development stage for $Z. The GST amount is shown as $0.00. The tax invoice is issued to A.

A has only made monetary contributions towards the required infrastructure.

Calculation of Margin on the sale of allotments

A has included an amount equal to the Specified Amount paid to C as part of the consideration paid to the Landowner for the purchase of the Land in the calculation of the margin on the sale of the subdivided lots.

Any amounts arising from the inclusion of the specified Amount in the margin have been set aside by A, pending on the outcome of this private ruling.

Developer - B

B is a developer specialised in residential land divisions.

B provides development management services to A pursuant to an agreement between the two entities. The agreement requires B to always act in accordance with the prior written approval of A.

B acted as agent for A in respect of the Deed.

Other information

Stamp duty on the purchase of Land was worked out based on the Purchase Price of $Y.

There is no documentary evidence held that would:

• show that the Landowner granted an encumbrance in respect of the Land in favour of C prior to the settlement of Land Contract, or

• show a link between the Land Contract and the Deed.

It was submitted that the private ruling application is not seeking confirmation on A's eligibility to use the margin scheme on the sales of its developed lots. Instead, the focus of the private ruling application is on the calculation of the margin for the purposes of section 75-10(2) of the GST Act.

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 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-10(2)

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Questions 1 and 2

1. Does A make a taxable supply to the Landowner in relation to its acquisition of the Land?

2. Does the consideration provided by A to the Landowner for its acquisition of the Land include both monetary and non-monetary components?

Summary

A does not make any supply whatsoever to the Landowner in relation to its acquisition of the Land. Therefore, A does not make a taxable supply under section 9-5 of the GST Act to the Landowner in relation to its acquisition of the Land.

The consideration provided by A to the Landowner for its acquisition of the Land does not include a non-monetary component.

The consideration provided by A to the Landowner for its acquisition of the Land is limited to the monetary consideration of $Y specified in the Land Contract as the Purchase Price.

Detailed reasoning

Section 9-5 of the GST Act 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

(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.

(* denotes a term defined in section 195-1 of the GST Act.)

Paragraph 9-5(a) of the GST Act, requires that the supply is made for consideration.

Supply

Supply is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'.

Subsection 9-10(2) of the GST Act provides a non-exhaustive list of activities or occurrences that are included within the meaning of supply including:

• a creation, grant, transfer, assignment or surrender of any right (paragraph 9-10(2)(e) of the GST Act)

• an entry into, or release from, an obligation to do anything, to refrain from an act, or to tolerate a situation (paragraph 9-10(2)(g) of the GST Act).

The Commissioner's view on the meaning of 'supply' is set out in Goods and Services Tax Ruling GSTR 2006/9 Goods and Services Tax: Supplies (GSTR 2006/9). GSTR 2006/9, sets out a number of propositions to assist in analysing a transaction to identify supplies made in the transaction. Proposition 5 is that to 'make a supply' an entity must 'do something'. The action required by proposition 5 does not have to be the supply itself. If an entity takes some action that causes a supply to occur, that can be sufficient (paragraph 74 of GSTR 2006/9 and Hornsby Shire Council v. Commissioner of Taxation [2008] AATA 1060; 2008 ATC 10-061; 71 ATR 442).

Consideration

Consideration is defined in section 195-1 of the GST Act as follows:

consideration, for a supply or acquisition, means any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition.

Subsection 9-15(1) of the GST Act states that consideration includes:

(a) any payment, or any act or forbearance, in connection with a supply of anything; and

(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

Further, it does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply (Subsection 9-15(2) of the GST Act).

Supply for consideration

The requirement that the supply be 'for' consideration means that there must be a connection or relationship between the supply and the consideration. The Commissioner has outlined the critical 'nexus' requirement between a supply and a consideration for the purposes of the GST Act in a number of GST public rulings, including Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6).

GSTR 2001/6 states at paragraphs 50 and 51:

50. Section 9-15 further 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. Thus, there must be a sufficient nexus between a particular payment and a particular supply for the payment to be consideration for that supply.

51. It follows that there are two elements to the definition of consideration. The first is the payment by one entity to another. The second element is the nexus that must be established between the payment and a supply.

Accordingly, it will not be sufficient for there to be a supply and a consideration. For there to be a supply made for consideration, three fundamental requirements must be met:

• the supplier must make a supply

• there must be a payment, and

• there must be a sufficient nexus between the supply and the payment.

Paragraph 12 of GSTR 2001/6 acknowledges that a 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form, such as:

• providing goods

• granting a right or performing a service (an act), and

• entering into an obligation, for example to refrain from selling a particular product (a forbearance).

At paragraphs 71 and 72, GSTR 2001/6 states:

71. In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description that parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made.

72. The test as to whether there is a sufficient nexus is an objective test. The motive of the supplier and the recipient also may be relevant in determining whether the supply was made for consideration, if a reasonable assessment of the evidence supports that motive.

Accordingly, we need to examine the relevant agreements between the parties and the surrounding facts and circumstances to determine if A made a taxable supply to the Landowner and therefore also provided non-monetary consideration for its acquisition of the Land.

1. Does A make a taxable supply to the Landowner in relation to its acquisition of the Land?

In a specified year, prior to rezoning and adoption of the Specified Plan, B and a number of other developers entered into the Initial Agreement with C. According to the Initial Agreement, the developers either owned or had agreements with the owners for the purchase and development of all the land identified in that agreement.

The developers entered into the Initial Agreement with C because they wished to develop their land and acknowledged that the development of the future residential land would require the construction or expansion of certain infrastructure. The developers agreed to contribute to the cost of the required infrastructure as set out in that agreement. C agreed to bear the cost of other infrastructure as shown in that agreement. The parties also agreed on the nature, amount, timing and calculation of the developers' contributions.

Under the Initial Agreement the parties agreed to enter into a future detailed agreement or other suitable binding arrangement governing the development and funding of all of the required infrastructure after the adoption of the Specified Plan.

The Specified Plan was endorsed on a specified date. One of the aims of the Specified Plan is to ensure that necessary infrastructure is provided to support the current and future communities.

Shortly after the endorsement of the Specified Plan, B as the developer of all the land listed in the Deed, entered into the Deed with C. B entered into the Deed as agent for A, who intended to purchase and develop the Land.

Under the Deed, B and C agreed that it was a condition precedent to the operation of the Deed that all the owners or persons who had entered into an agreement to purchase and or develop the land listed in the Deed, to sign a deed on exactly the same terms and conditions as the Deed. Further, pursuant to the Deed, the owners of the land were required to execute and deliver to C a signed encumbrance in respect of the land to secure the performance of specified requirements of the Deed.

Under the Deed, B as agent for A, agreed to contribute to the required infrastructure by paying to C a monetary amount and/or completing approved works with a combined value that is at least equivalent to the Specified Amount for that portion of the Land. The Specified Amount must be paid prior to or on the same date as lodgement for deposit of a Plan of Division at the Lands Titles Office, or on a specified date once a development approval is granted.

It was a condition precedent to the Deed for B to execute an encumbrance in accordance with the encumbrance attached to the Deed. The Deed also provided that in the event that B was not the owner of the Land, it had to procure from the owner of the Land an executed Encumbrance and to provide the executed Encumbrance to C.

Further, under the Deed, B had to sign or procure from the owner of the Land an executed encumbrance and deliver the Encumbrance to C as soon as reasonably practicable after the execution of the Deed.

On a specified date, A entered into the Land Contract with the Landowner.

While the Landowner was aware of the existence of the Deed and the proposed Memorandum of Encumbrance, they were not a party to these arrangements and were never under any obligation to contribute to the required infrastructure.

The Land Contract referred to the Encumbrance and stated that A was going to grant the Encumbrance in favour of C.

The Land Contract provided that the Land was sold subject to:

• any restrictions under planning, development or heritage laws, and

• any estates or interest by force of statute affecting the Land.

Further, under the Land Contract, A acknowledged that prior to its execution of the Land Contract it had exercised due diligence and had:

• examined all information relevant to the risks, contingencies and other circumstances having an effect on its purchase of the Land

• satisfied itself as to the nature and effect of laws restricting the use or enjoyment or development of the Land, and

• satisfied itself as to the value of the Land from its own independent valuations and reports.

The settlement of the Land Contract took place on a specified date and the title to the Land passed to A on that date.

On a specified date, after the settlement of the Land Contract, pursuant to conditions precedent in the Deed, A, as the owner of the Land, executed the Memorandum of Encumbrance in accordance with Section 127(1) of the Corporations Act 2001.

Under the Memorandum of Encumbrance, A acknowledged for itself and its successors in title that:

• the Encumbrance is imposed as part of a scheme for the regulation of development of land within the Specified Area, and

• the covenants of the Encumbrance are for the benefit of both the Encumbrancee and every other allotment within the Specified Area.

The Encumbrance was registered on the Title of the Land on a specified date.

Based on the facts of this case, A intended to purchase the Land for the purpose of land division and/or development. As the Land is situated in the Specified Area, prior to its purchase B as agent for A entered into the Initial Agreement, and later on, the Deed under which it agreed to contribute to the cost of the required infrastructure and pay the Specified Amount to C.

After the settlement of the Land Contract, A granted the Encumbrance over the Land in favour of C by executing the Encumbrance, which created a charge over the Land, thereby binding A as the registered owner of the land at the time.

The Landowner was not a party to the Initial Agreement, the Deed or the Memorandum of Encumbrance and was never under any obligation to contribute to the required infrastructure. The Landowner did not grant the Encumbrance over the Land in favour of C while the Landowner held the title to the Land.

The obligation surrounding the Encumbrance did not exist and was not attached to Land prior to the settlement of the Land Contract as the execution and registration of the Encumbrance on the Land, which were conditions precedent to the Deed and the Memorandum of Encumbrance, took place after the title of the Land had passed to A.

Pursuant to the Memorandum of Encumbrance, A has an obligation to contribute to the cost of the required infrastructure. This obligation is imposed under the Memorandum of Encumbrance which is a separate binding agreement between A and C.

Any obligations arising under the Deed or the Memorandum of Encumbrance, are between A and C, and independent of the sale of the Land by the Landowner.

Accordingly, the discharge of its obligations arising under the Memorandum of Encumbrance by A is not in connected with or for the supply of the Land by the Landowner. It follows that A did not release the Landowner from any obligation to tolerate an act or situation that was attached to the Land when it acquired the Land. Consequently, A did not make any supply to the Landowner in relation to its acquisition of the Land. A therefore did not make a taxable supply under section 9-5 of the GST Act to the Landowner.

1. Does the consideration provided by A to the Landowner for its acquisition of the Land include both monetary and non-monetary components?

As explained above, A has not made any supply whatsoever to the Landowner. Therefore, it has not provided any non-monetary consideration to the Landowner for its acquisition of the Land.

A's entry into the Deed and the Memorandum of Encumbrance and agreeing to be bound by the obligation to pay the Specified Amount to C has no nexus to the supply of the Land by the Landowner. The entry into the Deed and the Memorandum of Encumbrance was not 'in connection with' or 'for the inducement' of the supply of the Land by the Landowner to A and therefore does not constitute the provision of non-monetary consideration within the meaning of section 9-15 of the GST Act.

Therefore, the value of the obligations contained within the Deed or the Memorandum of Encumbrance does not form part of the consideration paid by A to the Landowner for its acquisition of the Land.

In this case the only consideration provided by A for its acquisition of the Land from the Landowner is the Purchase Price of $Y specified in the Land Contract.

Question 3

Is both the monetary and non-monetary consideration provided by A to the Landowner the relevant consideration for its acquisition of the Land in accordance with subsection 75-10(2) of the GST Act?

Summary

This question is not applicable because of the answer to question 2.

Other information

Based on the information provided, A has included an amount equal to the Specified Amount that it has paid to the Minister, as part of the consideration paid to the Landowner for the purchase of the Land in the calculation of the margin on the sale of the subdivided lots.

As explained above, the only consideration provided by A to the Landowner for the purchase of the Land is the Purchase Price of $Y. The value of the obligations contained within the Deed or the Memorandum of Encumbrance does not form part of the consideration paid by A to the Landowner for its acquisition of the Land.

Accordingly, A is required to amend its activity statements in which it has included the Prescribed Amount as part of the consideration paid for the purchase of the Land in working out the margin on the sale of the subdivided lots.

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