Edited version of private advice

Authorisation Number: 1051999658128

Date of advice: 30 June 2022

Ruling

Subject: GST and property

Question 1

Are the development works (collectively, the building works and associated site works) undertaken by Entity A pursuant to the Contract for Sale, Project Delivery Deed and executed Crown Lease (collectively referred to as the Transaction Documents) on the Land, consideration pursuant to section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the supply of the Land by the government entity?

Answer

The following development works, undertaken by Entity A, are not consideration for the taxable supply of the Land by the government entity:

(a) The building works.

(b) The x public housing units (that are transferred to the government entity or nominee for specified consideration)

(a)  The associated site works which do not automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease).

However, the, completed associated site works that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease land), are additional non-monetary consideration for the supply of the land by the government entity.

Question 2

Will Entity A make a taxable supply pursuant to section 9-5 of the GST Act of development services to the government entity, in completing the development works (collectively, the building works and the associated site works) on the Land, pursuant to the Transaction Documents?

Answer

Entity A will not make a taxable supply of development services to the government entity in respect of:

(a)  The building works.

(b)  The x public housing units (that are transferred to the government entity or nominee for specified consideration)

(c)   The associated site works which do not automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease land).

However, the completed associated site works that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease land) are taxable supplies of development services to the government entity.

Relevant facts and circumstances

The government entity is registered for GST.

Entity A carries on a business of property development and is registered for GST.

Contract for Sale

On XXYYYY, Entity A entered into a Contract for Sale (the Contract) for the grant of a 99 year Crown Lease for the Land from the relevant authority.

Under the Contract, the relevant authority, on behalf of the Commonwealth of Australia, agreed to grant, or procure the grant of, a 99 year Crown Lease to Entity A upon completion of the Contract on substantially the same terms as the Specimen Lease annexed to the Contract.

The purchase price stated in the Contract is $XX (inclusive of GST). The Land was supplied under the margin scheme. Completion of the Contract occurred on XXYYYY at which time the relevant authority was required to, and did grant, a Crown Lease over the Land to Entity A. The Crown Lease was granted on substantially the same terms as the Specimen Lease annexed to the Contract.

The Annexures attached to the contract are as follows:

•         Annexure A - Special Conditions

•         Annexure B - Specimen Lease

•         Annexure C - Project Delivery Deed (PDD)

•         Annexure D - Background Document Schedule

•         Annexure E - Deposited Plan

•         Annexure F - Clearance Certificate

The Contract, Project Delivery Deed (including the Public Housing Design Brief) and executed Crown Lease (collectively referred to as the Transaction Documents) include a number of mechanisms to ensure that Entity A satisfactorily completes the development within the agreed timeframe and to the appropriate specifications.

The Contract is contingent upon the relevant authority and Entity A entering into the PDD prior to or at the same time they entered into the Contract. Entity A must comply with all its obligations under the PDD.

The relevant authority may register a charge or caveat over the Crown Lease provided that it does not prevent the registration of a mortgage by Entity A in respect of the Crown Lease. The relevant authority agrees to withdraw the charge or caveat once Entity A has complied with its obligations under the Contract and PDD and Entity A requesting the relevant authority to do so.

Entity A acknowledges that it will be required to construct its own driveway(s) at its own cost.

Clause x of the Special Conditions provides that Project Documents means the Contract, the Leases, the PDD and any other document between the parties required to be entered into or complied with under this Contract.

Clause x of the Special Conditions, Consideration for Leases, states:

Unless otherwise specifically agreed in writing, for the purposes of complying with the Project Documents, including Completion:

(a)  "Buyers Works" means works that the Buyer must undertake under the Project Documents to the extent that the Commissioner has indicated in the Private Ruling that the works are consideration for the grant of the Leases;

(b)  the Buyer's works are a taxable supply made by the buyer,

(c)   unless determined otherwise in the Private Ruling, the value of the Buyer's Works is equal to the value of the Lease less the Price and is equal to the cost to the Buyer of the Buyer's Works (excluding any amounts in respect of GST for which there is an entitlement to an input tax credit), reasonably determined by the Buyer and set out in a tax invoice the Buyer must issue to the Seller on Completion after complying with clause x; and

(d)  the parties must meet their GST obligations in respect of those Buyer's Works and the Leases in the manner outlined by the Commissioner of Taxation consistently in the Private Ruling but if that is not determined then to that extent:

i.  tax invoices must be exchanged; and

ii. clauses x and x (the GST gross up clauses) do not apply to require payment of any additional amount.

Clauses x states:

Value of Buyer's Works

The Buyer must serve on the Seller at least x Working Days prior to the Date for Completion:

(a)          a draft of a tax invoice in respect of the Buyer's Works; and

(b)          reasonable evidence of the method by which the Buyer determined the value of the Buyer's Works.

Crown Lease

The Crown Lease is a market value lease.

The key Terms of the Crown Lease are:

• It commenced on XXYYYY.
• The term is for X years.
• The Lessee is Entity A.
• Entity A is required to pay rent of 5 cents per annum.

•         The Lease specifies the purpose for which the premises may lawfully be used:

To use the premises for the purpose of multi-unit housing of not more than X dwellings AND IN ADDITION the premises may also be used for one or more of the following purposes:

(i) car park;

(ii) civic administration;

(iii) club;

(iv) commercial accommodation use;

(v) communications facility;

(vi) community use EXCLUDING hospital and educational establishment used for a preschool, primary school, high school and secondary college;

(vii) craft workshop;

(viii) drink establishment;

(ix) indoor entertainment facility;

(x) indoor recreation facility;

(xi) non retail commercial use;

(xii) place of assembly;

(xiii) residential use PROVIDED THAT single dwelling housing is not permitted and FURTHER PROVIDED that residential use is only permitted above the first floor facing;

(xiv) restaurant;

(xv) shop; and

(xvi) tourist facility,

PROVIDED ALWAYS THAT the maximum gross floor area of any shop is X square metres.

•         Entity A must undertake the following:

(a) within X months from the commencement date of the Lease, or within such further time as may be approved in writing by the relevant authority, complete the erection of an approved development on the land in accordance with plans and specifications submitted to and approved by the relevant authority.

(b) provide and thereafter maintain the following, in accordance with the plans and specifications approved in writing by the authority:

-       hydraulic mains, stormwater drains and sewer lines, hydraulic fire mains and hydrants on the land

-       storage areas, covered car parking, hard standing car parking, adequately illuminated vehicle access roads, pedestrian pathways and vehicle access drives on the land

-       landscaping

(c) and also:

-       implement noise attenuation measures in accordance with a Noise Management Plan prepared specifically for the proposed use and that has previously been submitted and endorsed by the relevant authority or its successor

-       provide facilities to a standard acceptable to the relevant authority to enable electrical and telephone cables and wires to be installed underground

-       not remove any tree without the written consent of the relevant authority

-       screen and keep screened all service areas to the satisfaction of the relevant authority and ensure that all plant and machinery contained within the premises is suitably screened from public view

-       not erect any building or make structural alterations to any building without the relevant authority's written approval

-       maintain repair and keep in repair the premises to the satisfaction of the relevant authority

For clarity, in this private ruling the above requirements at points (a) to (c), which Entity A is required to undertake within a specified time period, are referred to as 'development works'. If the context requires, point (a) is referred to as 'approved development or building works' and point (b) and (c), as 'associated site works'.

Clause x requires Entity A to transfer to the relevant Territory, or a nominee of the Territory, X dwellings on the terms and conditions set out in Schedule x of the PDD, dated XXYYYY. However, this subclause x will cease to operate if and when the:

(i) Lessee, or any subsequent transferee of this lease, complies with the obligation to provide x dwellings to the relevant Territory or its nominee on the terms and conditions set out in Schedule x of the document titled "Project Delivery Deed" dated XXYYYY as though they were the "Developer" set out in that Project Delivery Deed or upon such other terms as may be advised by the relevant Territory; and

(ii) the relevant Territory acknowledges in writing the Lessee, or any subsequent transferee of this lease, has complied with the obligations of the "Developer" to provide x dwellings to the Territory or its nominee on the terms and conditions set out in Schedule x of the document titled "Project Delivery Deed" dated XXYYYY or such other terms as may be advised by the relevant Territory.

•         The Crown Lease may be terminated by the relevant Authority in the following circumstances:

-       if any rent or other moneys payable under this lease shall remain unpaid for three months; or

-       if an approved development in accordance with clause x is not completed within the period specified; or

-       if after completion of approved development, the Land is not used for a period of one year for the purpose for which the Crown Lease was granted; or

-       if Entity A fails to observe or perform other covenants under the Crown Lease.

•        Subject to Entity A paying all money required to be paid under the provisions of the relevant Act, Entity A shall be entitled to a further lease of the land for such further term and at such rent and subject to such conditions as may then be provided or permitted by the relevant legislation.

Annexure C: Project Delivery Deed (PDD)

The PDD was entered into on the same date as the Contract, being XXYYYY. Its purpose is to set out the obligations of Entity A, the relevant Authority and the relevant Territory, with respect to the development of the Land.

The Parties to the PDD are:

•         the relevant Authority

•         the relevant Territory

•         Entity A.

Clause x of the Background states that Entity A will, in developing the Land, comply with its obligations set out in the PDD.

Clause x of the Background states that the PDD includes schedules which outline additional specific obligations with which Entity A must comply.

Clause x provides that the term of the PDD commences on the Deed Date and continues until the earlier of:

i) The fulfilment of all the obligations under the PDD; or

ii) The termination of the PDD by either Party; or

iii) x years from the date of Completion of the Contract.

Clause 4 of the PDA is with respect to Security. In particular:

•      Entity A must provide to the relevant Authority the security amount ($X) for the performance of its obligations under the PDD.

The security amount was provided in the form of insurance bonds at settlement and is allocated as follows:

•      Subject to Schedule x, the Parties have agreed the sum of the Security represents a genuine pre-estimate of the loss of the relevant Authority if the PDD is terminated by the relevant Authority as a result of Entity A failing to comply with its obligations under the PDD.

•      If Entity A breaches any of its obligations under the PDD, the relevant Authority on its own behalf or on behalf of the relevant Territory, may call on the Security for all costs or losses reasonably incurred by the relevant Authority and/or the relevant Territory in respect of or in connection with the preparation of the PDD and any costs in respect of carrying out its or the relevant Territory's obligations or enforcing its or the relevant Territory's rights under the PDD.

•      If the relevant Authority calls on the Security, the Developer must renew the Security to the Security Amount and provide the same to the relevant Authority.

•      Entity A agrees, if:

(1) Entity A has not performed its obligations under the PDD within X years of the date of Completion; or

(2) the PDD is terminated under clause,

Entity A releases the Security to the relevant Authority.

•      On the Release Date, to the extent that the relevant Authority has not called on or is not entitled to call on the Security under clause x, the relevant Authority will release to Entity A the Security provided under clause x.

•      Entity A agrees that damages are an insufficient remedy in respect of a breach of the PDD and agrees that the relevant Territory and/or the relevant Authority may seek orders for specific performance requiring Entity A to undertake any obligation under the PDD.

Clause x of the PDD provides that the Developer is responsible for the costs of planning, designing, constructing, certifying or operating on/of or in relation to the Land or any Improvements and neither the relevant Territory nor the relevant Authority are responsible for meeting any part of those costs. Additionally, the Developer will not seek reimbursement or compensation of such costs from the relevant Territory or the relevant Authority.

Clause x of the PDD is with respect to Approvals of Relevant Agencies. In particular:

•           Entity A must, at its cost, submit applications to and obtain from the relevant Authority and Relevant Agencies all Approvals necessary for the carrying out of the development of the Land. This includes obtaining all planning Approvals or endorsements from the relevant Authority, including:

(1) approved Development Applications for all improvements within the Land; and

(2) any Approvals.

Clause x of the PDD is with respect to Sale of the Property. In particular:

•           Entity A is prohibited from selling or assigning any interest in the Crown Lease or the Land to any person before the Release Date (i.e. the date on which the relevant Authority is required to release the Security under clause x) unless certain conditions are satisfied.

•           On completion of any Disposition for which the relevant Authority's consent is required under this clause, Entity A must pay to the relevant Authority the amount (if any) by which the price payable by the Disponee for the property exceeds the price paid by Entity A to the relevant Authority for the Crown lease.

•           Entity A may enter into agreements for sale before the Release Date in respect of dwellings erected or to be erected on the Land provided that any agreement entered into is subject to and conditional upon Entity A performing its obligations under the PDD and each such agreement includes a condition to that effect.

Subclause x of the PDD specifies that Entity A must, within x months after completion of the Contract:

•           complete construction of a development on the Land; and

•           obtain a Compliance Certificate.

Pursuant to clause x of the PDD, Entity A indemnifies the relevant Authority and the relevant Territory from any claim, expense, costs, loss or damage suffered by the relevant Authority and/or the relevant Territory arising out of any failure by Entity A to perform its obligations under the PDD.

Pursuant to subclause x of the PDD, the relevant Authority may terminate the PDD if:

(1)    The contract for Sale is terminated;

(2)    Entity A permanently abandons the development of the Land;

(3)    Entity A is the subject of an Insolvency Event;

(4)    Entity A is in breach of a provision of this Deed, where that breach: (a) is not remedied within X Working Days of receipt of written notice specifying the default or (b) is not capable of being remedied.

Pursuant to subclause x of the PDD, Entity A may terminate the PDD if the relevant Authority defaults in a material respect in the performance of any material obligation under the Deed and does not remedy this breach within x Business Days of receipt of written notice from Entity A.

Clause x refers to the Schedules attached to the PDD. It provides that:

•           The schedules set out additional specific obligations and requirements with which Entity A must comply.

•           The terms in the Schedules take priority over other terms, conditions and definitions in the PDD.

Clause x, is with respect to Minimum Number of Affordable and Community Housing Dwellings. In particular:

•           Entity A must offer for sale a number of Affordable or Community Housing Dwellings which is no less than the Minimum Number of Affordable and Community Housing Dwellings constructed (or to be constructed) on the Land during the term of the PDD.

•           The Minimum Number of Affordable or Community Housing Dwellings includes the Minimum Number of Community Housing Dwellings which the Developer must sell.

Clause x, is with respect to the relevant Authority Consultation. In particular,

•           This clause sets out the obligations of Entity A to participate in a consultation with the relevant Authority. Clause x is described as an essential term of the PDD.

Schedule 5 - Verges and Footpaths, includes,

If the verges and/or footpaths adjacent to the Land are damaged during the term of the PDD, Entity A must repair the damage at its own cost, even if the damage was not caused by Entity A.

Schedule 6 -Additional Development Requirements includes,

Clause x Construction of vehicle crossing and driveway.

Entity A must at its own cost construct heavy duty concrete vehicle crossing(s) and driveway(s) in accordance with the Municipal Infrastructure Design Standards and Municipal Infrastructure Technical Specifications (MITS).

Clause x is with respect to Minimum Number of Public Housing Dwellings and Transfer Process. In particular, the Developer acknowledges and agrees, in consideration for the relevant Authority and the relevant Territory entering into the PDD and the Contract, Entity A must:

(1) transfer a number of Dwellings equal to the Minimum Number of Public Housing Dwellings, on the Land to the relevant Territory or its nominee consisting of:

(a)  x 3 Bedroom Dwellings; and

(b)  x 2 Bedroom Dwellings;

(2) for payment from the relevant Territory or its nominee of no more than:

(a)  $X (inclusive of GST) per 3 Bedroom Dwelling; and

(b)  $X (inclusive of GST) per 2 Bedroom Dwelling;

Clause x is with respect to Caveat:

•           The Parties agree that the terms of the PDD give rise in an interest in Land in favour of both the relevant Territory and the relevant Authority that can sustain a caveat.

•           Entity A must not do, or suffer to be done, anything to oppose or seek to remove a caveat lodged by the relevant Territory and/or relevant Authority on the Certificate of Title for the Land arising from the relevant Territory and relevant Authority's rights under the PDD.

The Project

When the project is completed a Certificate of Compliance will be issued by the delegate of the relevant Authority stating that 'I am satisfied that the building and development covenants contained in the Crown Lease have been complied with'.

Following the completion of the development, satisfaction of its obligations under the Transaction Documents and receipt of the Certificate of Compliance and the Certificate of Occupancy and Use, Entity A will apply to the relevant Authority for approval of the sub-division of the parcel under the relevant Legislation. Entity A will then lodge the approved Units Plan for registration with the Land Titles Office. The Crown Lease will also be required to be lodged.

On the same day the Registrar-General registers the Units Plan, the initial Crown Lease will come to an end due to the operation of section x of the relevant legislation. Entity A will then become the holder of an estate in leasehold in each unit for the same term as the original Crown Lease (referred to as a Unit Title Lease). The Registrar-General will cancel the original Crown Lease and issue certificates of title for each unit to Entity A.

Entity A will then transfer the x Public Housing Dwellings to the relevant Territory or Nominee for the agreed prices and offer for sale the Affordable and Community housing Dwellings to the identified buyers. The balance of the Dwellings will be sold to the general public.

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

Reasons for decision

In this reasoning:

•         unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

•         all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act

•         all reference materials, published by the Australian Taxation office (ATO), that are referred to are available on the ATO website ato.gov.au

Question 1

Are the development works (collectively, the building works and associated site works) undertaken by Entity A pursuant to the Contract for Sale, Project Delivery Deed and executed Crown Lease (collectively referred to as the Transaction Documents) on the Land, consideration pursuant to section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the supply of the Land by the relevant Authority?

Under section 9-15, 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. Therefore, there must be a sufficient nexus between a particular payment and a particular supply for a payment to be consideration for that supply.

That is, there are two elements to the definition of consideration, which are:

•         the payment by one entity to another, and

•         a nexus that must be established between the payment and a supply.

Goods and Services Tax Determination GSTD 2021/1 Goods and services tax: development works in the Australian Capital Territory, provides advice on the GST treatment of arrangements between government agencies and private developers in the context of the development of land in the ACT.

GSTD 2021/1 considers whether building works carried out by developers on land they have acquired under a long-term Crown lease (Crown lease) and associated site works, have the necessary nexus and are therefore non-monetary consideration for the supply of that Crown Lease by a government agency.

The facts in your situation show that the arrangement between the relevant Authority and Entity A have the typical features of the arrangements outlined in GSTD 2021/1.

Paragraphs 5 to 12 of GSTD 2021/1 state:

5.    Under a building arrangement, the monetary amount a developer pays to a government agency on completion of the contract to acquire a Crown lease over land in the ACT is consideration for the supply of the Crown lease by the government agency for the purposes of section 9-5.

6.    However, the building works a developer completes under a building arrangement (in accordance with the terms of the PDA and the Crown lease) are not consideration for the supply of the Crown lease by the government agency under section 9-5.

7.    The building works are not non-monetary consideration for the supply of the Crown lease land because the building works provide no measurable economic value to the government agency. ^... The building works are of value to the developer as they can either retain the land, subdivide the land and sell the individual lots or sell the Crown lease land in its entirety to another entity.

8.    While the developer is required to complete these building works within a certain time period after acquiring the Crown lease, this stipulated timeframe does not make these works non-monetary consideration for the supply of the Crown lease.

9.    As explained in paragraph 3 of this Determination, the developer may also be required to undertake associated site works which fall into three categories.

10.  If ownership of the completed associated site works is retained by the developer, they are not non-monetary consideration for the supply of the Crown lease land by the government agency. This is because the associated site works retained by the developer provide no measurable economic value to the government agency.

11.  While building works and associated site works retained by the developer may assist in fulfilling a government agency's objectives of developing areas of land, they do not provide the government agency with anything other than assurance that the land is developed in compliance with the relevant government approved plans and the development complies with relevant laws (for example, environmental or health and safety laws).

12.  Completed associated site works that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by the government agency^... (whether on unleased land or the Crown lease land), are non-monetary consideration for the supply of the Crown lease land. This is the case provided Division 81 and Division 82 do not apply.

In order for the building works or associated site works to be consideration for the supply of the Crown lease land, there must be sufficient nexus between the supply and the consideration.[1]

For goods, services or a 'thing' to be non-monetary consideration for a supply, it must have economic value and independent identity provided as compensation for the making of the supply. It must be capable of being valued and be a thing the acquirer would usually or commercially pay money to acquire.[2]

Paragraph 39 of GSTD 2021/1 states, as the meaning of consideration is broad, not all promises and obligations made and agreed between the parties will be non-monetary consideration for a supply. Some things are simply part of the terms of the arrangement on which the respective parties have reached agreement.[3] Promises or obligations that have no economic value or independent identity separate from the transaction will not be non-monetary consideration for a supply.[4]

In the context of granting a lease over land, the essential character of what is supplied is the legal right to exclusive possession of the land for the term. However, this does not prevent the owner of the freehold interest in the land imposing conditions regarding permitted use that will apply for the term of the lease.[5]

The incorporation of 'building and development provisions' into ACT Crown leases, together with statutory restrictions on transfer or assignment of the Crown lease until these building and development provisions are satisfied[6], are standard obligations in Crown leases in the ACT (paragraph 41 GSTD 2021/1).[7]

Paragraph 43 of GSTD 2021/1 explains that in relation to the building works, while the developer does not have a freehold interest in the land, the nature of a Crown lease in the ACT (usually for 99 years, at nominal rent, automatically renewable and compensation payable for the value of improvements if not renewed) results in:

a.         The developer, as lessee, being the only entity able to lease or dispose of an interest in the buildings it constructs on the Crown lease land

b.         No increase in the value of the reversion held by the ACT as the rent remains nominal for the duration of the Crown lease and future renewals, and

c.         The developer or future lessees being entitled to compensation for the building works if the lease is ever terminated.

Undertaking the building works on the Crown lease land does not provide the government agency with anything of measurable economic value. For this reason, the construction of building works on the Crown lease land is not the provision of non-monetary consideration for the government agency's supply of the land.[8]

In this case, undertaking the building works on the Land pursuant to the Transaction Documents does not provide the relevant Authority with anything of measurable economic value. For this reason, the construction of building works on the Land is not the provision of non-monetary consideration for the relevant Authority's supply of the Land.

Associated site works

The Purchaser is also required to provide associated site works under Clause x of the Crown Lease. Where the completed associated site works are retained by the Developer, they are not non-monetary consideration.[9]

However, the completed associated site works that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or Crown lease land) are considered non-monetary consideration for the taxable supply of the Land by the relevant Authority.[10]

Accordingly, provision of these particular associated site works will be non-monetary consideration for the supply of the Crown lease land.

The value of the non-monetary consideration is determined in accordance with the principles set out in GSTR 2001/6.

Affordable or Community Housing Requirements

Pursuant to subclause x of Schedule x to the PDD, the Developer must offer for sale, in a manner consistent with the PDD, a number of Affordable or Community Housing Dwellings which is not less than the Minimum Number of Affordable and Community Housing Dwellings (x) constructed (or to be constructed) on the Land during the term of the Deed.

Schedule x also contains Mandatory and Development Application requirements with which Entity A must comply.

The affordable and community housing obligations are merely a restriction on the type of development undertaken, in the similar way that a government agency can impose height limitations on the building or requirements for external finishes. Such limitations on the leasehold do not demonstrate that something is provided to the government agency as consideration for the grant of the lease. Performance of these obligations does not result in the works creating the affordable and community housing being provided as non-monetary consideration for the grant of the Crown lease.

Public Housing Dwellings

The Public Housing requirements / arrangements are distinct from the building and associated works for the approved development and are not consideration for the supply of the Crown lease land.

The consideration for the supply of the Public Housing Dwellings has been determined separately and is a fee for service arrangement. The relevant Authority and Entity A have not entered into an arrangement whereby the consideration for the supply of the Crown Lease is reduced by consideration for the Public Housing Dwellings.

Question 2

Will Entity A make a taxable supply pursuant to section 9-5 of the GST Act of development services to the relevant Authority, in completing the development works (collectively, the building works and the associated site works) on the Land, pursuant to the Transaction Documents?

Section 9-5 provides that you make a taxable supply if:

•         you make the supply for consideration

•         the supply is made in the course or furtherance of on enterprise that you carry on

•         the supply is connected with the indirect tax zone (Australia), and

•         you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Paragraph 16 of Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) states:

By providing non-monetary consideration for a supply, you are in turn making a supply....

As set out in Question 1, the completion of the Building Works, the Public Housing Units and the Associated Works (except for the Associated Works that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease land) are not additional non-monetary consideration for the supply of the Land.

Consequently, there is no supply by Entity A to the relevant Authority in respect of the Building Works, the Public Housing Units and the Associated Works which do not automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or the Crown lease land).

However, in respect of Associated works which are not retained by the developer (for example hydraulic mains, stormwater drains and sewer lines) and that automatically belong to a government agency or are transferred to a government agency, or a third party nominated by a government agency (whether on unleased land or Crown lease land), the Associated works represent something that the relevant Authority would usually or commercially pay money to acquire and have a measurable economic value.

In the case of the Associated works which are not retained by the Developer, non-monetary consideration is provided by Entity A for the supply of the Land by the relevant Authority.

Therefore, as Entity A will be making a supply of the Associated works not retained by Entity A to the relevant Authority, the requirements of section 9-5 will be satisfied as:

•         the supply will be for the identified consideration,

•         the supply will be connected with Australia;

•         Entity A will be making a supply in the course of its enterprise;

•         Entity A is registered for GST

•         the supply will not be GST free or input taxed.

[1] Paragraph 37 of GSTD 2021/1

[2] Paragraph 38 of GSTD 2021/1

[3] See AP Group Limited v Commissioner of Taxation [2013] FCAFC 105 (AP Group) at [49]

[4] See paragraph 80 of GSTR 2001/6.

[5] Paragraph 40 of GSTD 2021/1

[6] See section 298 of the Planning and Development Act 2007 (ACT).

[7] See www.planning.act.gov.au/leasing-and-titles.

[8] Paragraph 44 of GSTD 2021/1

[9] Paragraph 10 of GSTD 2021/1

[10] Paragraph 12 of GSTD 2021/1

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