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Edited version of your written advice
Authorisation Number: 1051334225783
Date of advice: 26 February 2018
Ruling
Subject: Contra supplies and the application of the margin scheme under a development lease arrangement
Question 1
Will Entity A make taxable supplies to Entity B pursuant to the development agreement?
Answer
Yes, Entity A will make taxable supplies of land to Entity B.
Question 2
Will Entity A make creditable acquisitions from Entity B pursuant to the development agreement?
Answer
Yes, Entity A will make creditable acquisitions of development services from Entity B.
Question 3
What is the consideration for Entity A’ supplies of the land?
Answer
Pursuant to section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the consideration for Entity A’ supplies of the land is equal to the monetary payment (if any) and the GST inclusive market value of the development services.
Question 3A
For each stage, can Entity A use the agreed GST-inclusive market value of Entity B’s development services (calculated as the completion cost for the relevant stage) as consideration for Entity A’s grant of final tenure without the need to allocate part of the value of such services to the two other specified sites?
Answer
Yes.
Question 4
In which tax period is the GST on Entity A’ supplies of the land and input tax credit for their creditable acquisition of development services from Entity B attributable?
Answer
The GST on Entity A’ supplies of the land is attributable to the tax period in which the reciprocal tax invoices (including any Recipient Created Tax Invoices issued to Entity A by Entity B) for the relevant stage are issued or a monetary payment is made, whichever is the earlier.
The input tax credits for Entity A’s acquisition of development services from Entity B are attributable to the tax period in which the reciprocal tax invoices for the relevant stage are issued.
Question 5
Will an adjustment event arise under Division 19 of the GST Act if, at the time of granting final tenure, the GST-inclusive market value of the parties’ respective supplies has changed from the value already determined by the parties?
Answer
No.
Question 6
Can Entity A apply the margin scheme to their supplies of land to Entity B?
Answer
Yes.
Question 7
If the answer to question 6 is yes, what will be the margin for Entity A’ supplies?
Answer
The margin for Entity A’ supplies of land to Entiy B is the amount by which the consideration for these supplies exceeds an approved valuation of the land made as at 1 July 2000.
Question 8
Will Entity A receive any non-monetary consideration for their supply of the two other specified sites?
Answer
Yes.
Question 9
For the purposes of subsection 75-5(1A)(a) of the GST Act when will Entity A’ supplies of the land be made?
Answer
Entity A will be making their supplies of the land at settlement for each of the stage sites.
Question 10
Assuming the answer to question 8 is yes, to which tax periods is the GST payable in respect of Entity A’s taxable supplies of land and input tax credit for its creditable acquisition of development services in relation to the two other specified sites attributable?
Answer
In relation to the two other specified sites, the GST on Entity A’s taxable supplies of the land is attributable to the tax period in which the reciprocal tax invoices (including any Recipient Created Tax Invoices issued to Entity A by Entity B) for the relevant stage are issued or a monetary payment is made, whichever is the earlier.
The input tax credits for Entity A’s acquisition of development services from Entity B are attributable to the tax period in which the reciprocal tax invoices for the relevant stage are issued.
Question 11
Assuming the answer to question 8 is yes, can Entity A determine the GST-inclusive vale of its supplies of land in relation to the two other specified sites with reference to the GST-inclusive market value of these sites at the date of transfer?
Answer
Yes.
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 9-70
A New Tax System (Goods and Services Tax) Act 1999 Section 9-75
A New Tax System (Goods and Services Tax) Act 1999 Section 11-5
A New Tax System (Goods and Services Tax) Act 1999 Section 11-10
A New Tax System (Goods and Services Tax) Act 1999 Section 29-5
A New Tax System (Goods and Services Tax) Act 1999 Section 29-10
A New Tax System (Goods and Services Tax) Act 1999 Section 75-5
A New Tax System (Goods and Services Tax) Act 1999 Section 75-10
A New Tax System (Goods and Services Tax) Act 1999 Section 75-11
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1
A New Tax System (Goods and Services Tax) Act 1999 Division 19