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Ruling

Subject: Contribution from Community Club

Question

Is the financial contribution for the relocation and development of tennis courts and other facilities made by the Community Club to Council consideration for a taxable supply by Council?

Answer

Yes; the financial contribution is consideration for a taxable supply.

Relevant facts and circumstances

You are a Local Government Council.

Under your Sport and Recreation Plan, you planned to relocate tennis facilities which involved the development of six tennis courts; four of which were for the exclusive use of the Community Club.

Under the Plan, you proposed to provide the necessary land and take responsibility for carrying out the works and paying supplier invoices. Title to the land remained with you.

Funding was provided by the Shire, the State, the Commonwealth and the Community Club.

The Community Club also agreed to provide assistance for the relocation and development of a community tennis facility. The agreed contribution was one-third of the cost of the four exclusive use courts plus two thirds of the cost of lights, fences and transformers.

A lease agreement was entered into between you and the Community Club. The lease was for the exclusive use of four of the tennis courts and priority access to the other two courts and the premises known as the Pavilion. The lease identified the permitted use of the courts and premises and set the annual rental payable.

Under the lease, 'Basic Consideration' means all consideration (whether in money or otherwise) to be paid or provided by the Lessee for any supply or use of the Premises and any goods, services or other things provided by the Lessor under this Lease (other than tax payable pursuant to this clause).

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 9

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

A Taxable Supply: The basic rules

Under the basic rules, Division 9 of the GST Act defines taxable supplies, states who is liable for the GST, and describes how to work out the GST on supplies.

Under section 9-5 of the GST Act you make a taxable supply if:

· you make a supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you carry on; and

· the supply is *connected with Australia; and

· 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 under the exemptions.

Note: Definitions of asterisked terms are provided in the Dictionary under section 195-1 of the GST Act.

The question at issue is whether the financial contribution by the Community Club was consideration for a taxable supply by Council.

Is there a supply?

Section 9-10 of the GST Act provides the definition of supply as any form of supply whatsoever and it includes a grant, assignment or surrender of real property.

Goods and Services Tax Ruling GSTR 2006/9: GST supplies, examines the meaning of 'supply' in the GST Act. The 'Background' section of the Ruling discusses the general context of the GST Act and outlines how this informs the meaning of the term 'supply' in the GST Act including its relevance to input tax credit entitlements.

Through the lease agreement you entered into in 2009 with the Community Club for the exclusive use of four of the tennis courts and priority access to the other facilities you made a supply of real property in accordance with paragraph 9-10(2)(d) of the GST Act.

Is there consideration?

Section 9-15 of the GST Act provides the definition of consideration as any payment, or any act or forbearance, in connection with, in response to, or for the inducement of, a supply of anything.

Under the lease agreement the Community Club agreed to make regular rental payments for the supply of the right to occupy the tennis facilities. In addition, the Community Club agreed to provide a contribution of one-third of the cost of the four exclusive use courts plus two thirds of the cost of lights, fences and transformers of the community tennis facility. These payments are in connection with, in response to, or for the inducement of the supply of real property.

The contribution from the Community Club was in connection with or for the inducement of the relocation and development of the community tennis facility.

The scheme for the relocation and development of the community tennis facility was described in the Sport and Recreation Plan. The execution of this plan was dependant on a combination of government and Community Club funding being forthcoming.

There is a sufficient nexus between the supply of real property and the contribution by the Community Club.

Is there a taxable supply?

You made a supply for consideration.

The supply was made in the course or furtherance of your enterprise.

The supply is connected with Australia because the real property is in Australia and you are registered for GST.

The rental payments and contribution from the Community Club represent consideration for a taxable supply of the rights supplied under the lease agreement that you entered into with the Community Club.