Edited version of private advice

Authorisation Number: 1051939309926

Date of advice: 14 January 2022

Ruling

Subject: GST and creditable acquisitions

Question

Did you make a creditable acquisition as defined in section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to your acquisition of Development Services from Entity A?

Answer

Yes.

This ruling applies for the following period:

1 July yyyy - 30 June yyyy

The scheme commences on:

dd/mm/yyyy

Relevant facts and circumstances

You are registered for GST effective from 1 July xxxx.

You are a member of a GST Group effective from 1 July xxxx.

ABC is the GST Group representative.

The Commissioner has previously considered an arrangement between the following entities:

•         You;

•         Entity A; and

•         Entity B

Entity B is an endorsed charity for the purposes of the GST Act and a registered charity under the Australian Charities and Not-for-profits Commission Act 2012.

On dd/mm/yyyy the Commissioner issued a private ruling to you (Authorisation number xxxxxxxxxxxxx) confirming that the supply from you to Entity B of a 'leasing enterprise', where the property is supplied by way of a concurrent lease, constitutes a GST-free supply of a going concern.

Under the above-mentioned arrangement (Arrangement) the following documents were entered into:

1.    Document A between you and Entity B; and

2.    Document B, between you (as Lessor) and Entity B (as Tenant) commencing on dd/mm/yyyy for a term of xx years.

3.    Document C between you, Entity A and Entity B.

You acquired Development Services from Entity A encompassing the construction of new residential premises.

The newly developed residential premises will be applied in the leasing enterprise being managed by Entity B under the arrangement (Document A and Document B). A number of the newly developed dwellings will also be sold as new residential premises.

The supply of Development Services from Entity A to you was a taxable supply.

You provided consideration for the supply Development Services from Entity A.

Relevant legislative provisions

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

Section 11-5

Section 11-15

Subsection 11-15(1)

Subsection 11-15(2)

Reasons for decision

In the following 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

The meaning of the term 'creditable acquisition' is contained in section 11-5:

11-5 What is a creditable acquisition?

You make a creditable acquisition if:

(a)  you acquire anything solely or partly for a creditable purpose; and

(b)  the supply of the thing to you is a taxable supply; and

(c)   you provide, or are liable to provide, consideration for the supply; and

(d)  you are registered or required to be registered.

The meaning of 'creditable purpose' is contained in section 11-15. Subsections 11-15(1) and 11-15(2) provide:

11-15 Meaning of creditable purpose

(1)    You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2)    However, you do not acquire the thing for a creditable purpose to the extent that:

(a)  the acquisition relates to making supplies that would be input taxed; or

(b)  the acquisition is of a private or domestic nature.

You entered into an arrangement with Entity A and Entity B. Pursuant to the transaction documents, you would transfer, by way of Lease, the management of the leasing of xxx dwellings to Entity B together with the covenants under the respective leases. Document C confirms that the Lease runs concurrently with the respective existing tenancies.

We previously issued a ruling to you, dated dd/mm/yyyy wherein we confirmed that the lease of the property to Entity B together with the existing tenancies thereon constituted a GST-free supply of a going concern pursuant to section 38-325.

Document A outlines that you will acquire Development Services, being all services to be provided by Entity A in developing the property, in return for consideration.

Under the arrangement, the majority of the existing dwellings will be demolished. New Torrens Title Allotments will be created for the developed properties.

The newly developed properties will be applied in the leasing enterprise being managed by Entity C under the arrangement. A number of the newly developed dwellings will also be sold as new residential premises.

Application to your situation

In this case you have acquired Development Services from Entity A in the course of carrying on your enterprise of construction and leasing, thereby satisfying subsection 11-15(1).

The acquisition of the Development Services relates to:

1.    Your supply of a GST-free going concern to Entity B as determined in the private ruling issued on dd/mm/yyyy (Authorisation number xxxxxxxxxxxxx).

2.    The sale of new residential premises to the general public.

As the acquisition of the Development Services does not relate to the making of input taxed supplies and is not of a private or domestic nature, neither of the negative limbs of subsection 11-15(2) apply.

Therefore, you have satisfied paragraph 11-5(a), acquiring the Development Services for a creditable purpose.

The supply of Development Services from Entity A to you was a taxable supply satisfying paragraph 11-5(b).

Paragraph 11-5(c) is satisfied as you are liable to provide 'consideration' for the supply of Development Services acquired from Entity A consisting of both monetary consideration and non-monetary consideration.

You are also registered for GST effective from 1 July yyyy.

Conclusion

You have made a creditable acquisition as defined in section 11-5 in regard to the Development Services acquired from Entity A.