Edited version of private ruling

Authorisation Number: 1011771805854

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Ruling

Subject: Tax invoices and lease documents

Question 1

Can the lease document relating to a commercial building be considered as a valid tax invoice?

Answer

No, the lease document relating to a commercial building does not meet all the requirements of a valid tax invoice. Therefore, it cannot be considered to be a valid tax invoice. Where a supplier discovers that a document issued in good faith is not valid, then replacement documents could be issued.

Question 2

If the lease document is not considered to be a valid tax invoice, would the invoices issued and annual notifications of CPI rent increases be determined as a tax invoice for the entire period of the occupation of the supply?

Answer

As discussed in question 1 for tax invoices to be valid they have to comply with certain requirement. Those requirements are found in subsection 29-70(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) (GST Act).

If the invoices issued and annual notifications of CPI rent increases comply with subsection 29-70(1) of the GST Act then they may be considered to be valid tax invoices.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for GST.

The recipient is registered for GST.

You and the recipient signed a X year lease with a X year option to continue for a commercial building.

The commercial premise is in Australia.

During the next X years the recipient paid the rent including GST via a direct deposit into your bank account.

You supplied bank statements showing direct debit records of payments made by the recipient.

The bank statements show two entries for each payment as two separate deposits, one for the GST and the other for the exclusive value of the rent.

You increased the rent annually in line with the CPI.

You issued two monthly tax invoices for rent in the early stages of the lease.

You reconcile all issued tax invoices with your bank statement.

Your customer's payments were not consistent in timing or in value; therefore you supplied several summaries to them by way of a spreadsheet.

You have remitted 1/11^th of all rental income received for this property as GST collected every quarter in your activity statement.

Under the terms of the lease when the CPI rent increases occurred your customers were supplied with a document containing the:

ABN:

· date of increase;

· amount of rent and GST;

· Your name.

Your customer regularly fell into arrears and they were contacted by either phone or in writing, on numerous occasions.

You provided summaries of amounts overdue consisting of a spreadsheet. Your customer did not disputed theses amounts.

As your customer regularly fell into arrears, negotiations broke down.

Legal proceedings commenced to recover the outstanding amounts.

Your customer contends that:

· the original lease is not a valid tax invoice;

· you were not entitled to charge GST on the supply unless a separate tax invoice is produced for each month;

· they were not obliged to pay GST in addition to the rent as per the lease unless a separate tax invoiced was produced;

· since you did not issue separate tax invoices you were not entitled to charge GST on the supply and that all monies paid to you were rent and not part GST;

· no monies was outstanding, in fact they are owed money.

You have asked for a private ruling to determine whether the lease is a valid tax invoice.

Question 1

Can the lease document relating to a commercial building be a valid tax invoice?

Detailed reasoning

Subsection 29-70(1) of the GST Act sets out the information a document should contain to qualify as a tax invoice it states:

(1) A tax invoice is a document that complies with the following requirements:

(a) it is issued by the supplier of the supply or supplies to which the document relates, unless it is a *recipient created tax invoice (in which case it is issued by the *recipient);

(b) it is in the *approved form;

(c) it contains enough information to enable the following to be clearly ascertained:

(i) the supplier's identity and the supplier's *ABN;

(ii) if the total *price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient - the recipient's identity or the recipient's ABN;

(iii) what is supplied, including the quantity (if applicable) and the price of what is supplied;

(iv) the extent to which each supply to which the document relates is a *taxable supply;

(v) the date the document is issued;

(vi) the amount of GST (if any) payable in relation to each supply to which the document relates;

(vii) if the document was issued by the recipient and GST is payable in relation to any supply - that the GST is payable by the supplier;

(viii) such other matters as the regulations specify;

(d) it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

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

Goods and Services Tax Ruling GSTR 2000/35 explains how to attribute GST and input tax credits with respect to supplies and acquisitions made for a period or on a progressive basis.

Paragraphs 48-50 of GSTR 2000/35 state the following:

48. A document which is created at the commencement of an arrangement, for example, a lease agreement, is not generally an invoice for each component of the supply or acquisition. However, it can be a tax invoice for each component if it satisfied the requirements of subsection 29-70(1) or if the Commissioner exercises his discretion under that section to treat a document which is not a tax invoice as a tax invoice.

49. You do not have to issue separate tax invoices for each component of the supply, if your agreement or similar document satisfies the requirements for a tax invoice. As attribution occurs for each component of the acquisition you can claim input tax credits for that component of the acquisition if your agreement or similar document satisfies the requirements for a tax invoice.

50. You may satisfy the requirements of subsection 29-70(1) by adding an attachment to the document.

From the facts provided you and the purchaser entered into a commercial lease contract, the contract did not include the following information:

· the words "Tax invoice";

· your ABN;

· the extent to which each supply to which the document relates is a taxable supply;

· the amount of GST payable in relation to each supply.

Therefore, the lease cannot be considered as a tax invoice as it does not satisfy all the requirements of subsection 29-70(1) of the GST Act.

Please note that as stated in paragraph 50 of GSTR 2000/35 you may satisfy the requirements of subsection 29-70(1) of the GST Act by adding an attachment to the document.

Question 2

If the lease document is not considered to be a valid tax invoice, would the two invoices issued and annual notifications of CPI rent increases be determined to be a tax invoice for the entire period of the occupation of the supply?

Detailed reasoning

As discussed in question 1 for tax invoices to be valid they have to comply with certain requirement. Those requirements are found in subsection 29-70(1) of the GST Act.

If the invoices and annual notifications of CPI rent increases comply with subsection 29-70(1) of the GST Act then they may be considered to be valid tax invoices.