Edited version of private advice

Authorisation Number: 1052043557660

Date of advice: 11 October 2022

Ruling

Subject: GST and property

Question 1

Are the development works (collectively, the Building Works or Approved Development and Associated Works) undertaken by Entity A pursuant to the Contract for Sale, X Project Delivery Deed (XPDD), Y Project Delivery Deed (YPDD) and 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 taxable supply of the Land by the government entity under section 9-5 of the GST Act?

Answer

Only to the extent Associated Works described in the Transaction Documents 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) they will be consideration, pursuant to section 9-15 of theGST Act for the taxable supply of the Land by the government entity to Entity A under section 9-5 of the GST Act.

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)

          (c)                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).

Question 2

Is the government entity making a creditable acquisition, pursuant to section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), of the Development Works (collectively, the Building Works or Approved Development and Associated Works) undertaken by Entity A pursuant to the Transaction Documents, on the Land?

Answer

Only to the extent Associated Works described in the transaction documents, 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).

The following Development Works, undertaken by Entity A, are not creditable acquisitions 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)

          (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).

This ruling applies for the following period:

DD MM YYYY to DD MM YYYY

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

The following are the facts as outlined in your request together with further facts we have ascertained. 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.

The government entity is registered for GST.

Entity A is a private Australian Company incorporated on MM YYYY and registered for GST on MM YYYY. Entity A carries on a business of property development.

The following key documents were provided in support of your Private Ruling request:

•                     Executed Crown Lease dated MM YYYY

•                     Executed Commercial Contract for Sale dated MM YYYY between Entity A and the government entity.

•                     Executed Project Delivery Deed (APDD) dated MM YYYY between Entity A and the government entity.

•                     Executed Project Delivery Deed (TPDD) dated MM YYYY between Entity A and the government entity.

•                     Annexure X - Prescribed Conditions for Associated Works.

Contract for Sale

On MM YYYY, Entity A entered into a Commercial Contract for Sale ('the Contract') for the grant of a 99- year Crown Lease for the Land from the government entity.

Under the Contract the government entity 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 $X (inclusive of GST). The Land was supplied under the margin scheme. Completion of the Contract occurred on MM YYYY at which time the government entity 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 - A Project Delivery Deed (APDD)

•                     Annexure D - T Project Delivery Deed (TPDD)

•                     Annexure E - Background Document Schedule

•                     Annexure F - Deposited Plan

•                     Annexure G - Prescribed Conditions for Associated Works

•                     Annexure H - Deed of unconditional undertaking

•                     Annexure I - Clearance Certificate

The Contract, APDD, TPDD 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.

Annexure X - Special Conditions

No later than X Working Days prior to the Date of Completion, the Buyer must provide to the Seller the completed but unexecuted Deed of Unconditional Undertaking substantially in the form of the proforma Deed of Unconditional Undertaking for submission to the Planning and Land Authority for approval in the sum specified in clause X of the prescribed Conditions for Associated Works.

The Contract is contingent upon the government entity and Entity A entering into the APDD and TPDD prior to or at the same time they entered into the Contract.

Entity A must comply with all its obligations under the APDD and TPDD.

The government entity 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 government entity agrees to withdraw the charge or caveat once Entity A has complied with its obligations under the Contract, APDD and /or the TPDD and Entity A requesting the government entity to do so.

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

Subparagraph x of the Special Conditions provides that Project Documents means the Contract, the Leases, the APDD, the TPDD and any other document between the parties required to be entered into or complied with under the 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 and (the GST gross up clauses) do not apply to require payment of any additional amount.

Clauses x of the Special Conditions, Value of Buyer's Works, states:

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 MM YYYY

•                     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 X AND IN ADDITION the premises may also be used for one or more of the following purposes:

(i)            civic administration;

(ii)           club;

(iii)         commercial accommodation use;

(iv)         communications facility;

(v)          community use EXCLUDING hospital, education establishment for preschool, primary school, high school and secondary college;

(vi)         craft workshop;

(vii)        drink establishment;

(viii)       indoor entertainment facility;

(ix)         indoor recreation facility;

(x)          non retail commercial use;

(xi)         outdoor recreation facility;

(xii)        place of assembly;

(xiii)       residential use LIMITED to a maximum of X dwellings and EXCLUDING single dwelling housing and caretaker's residence;

(xiv)       restaurant;

(xv)        shop PROVIDED THAT the maximum gross floor area of any shop is x square metres; or

(xvi)       tourist facility,

•         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 Authority, complete the erection of an approved development on the land in accordance with plans and specifications submitted to and approved by the government entity.

          (b)                Within X months from the commencement date of the Lease, or within such further time as may be approved in writing by the Authority, complete the following associated works:

(i)            design and construction of a water main, including the provision of a fire hydrant and associated infrastructure to meet fire requirements;

(ii)           upgrade of sewer main and ties in accordance with Icon Water approved design;

(iii)          design and construction of a heavy duty concrete vehicle crossing(s) and driveway(s);

(iv)          landscaping and paving along unleased government land adjoining the land;

(v)           all offsite workday to accommodate access and egress in a forward motion of a 12.5 metre long waste vehicle; and

(vi)          any other works required,

including all ancillary works and fittings in accordance with the prescribed conditions for associated works and plans and specifications prepared by the Lessee and previously submitted to and approved in writing by the Authority.

(c) provide and thereafter maintain the following, in accordance with the plans and specifications approved in writing by the government entity:

-                     a public pedestrian access way 5 metres wide which is disabled access

-                     a disabled accessible ramp

-                     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

(d) 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 government entity

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

-                     not remove any tree without the written consent of the government entity

-                     screen and keep screened all service areas to the satisfaction of the government entity 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 government entity's written approval

-                     maintain, repair and keep in repair the premises to the satisfaction of the government entity

For clarity, in this private ruling, the above requirements at points (a) to (d), 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 points (b) to (d), as 'associated site works'.

Clause X requires Entity A to transfer to the government entity, X dwellings on the terms and conditions set out in Schedule X of the TPDD, dated MM YYYY. However, this subclause X will cease to operate if and when:

(i) Entity A, or any subsequent transferee of this lease, complies with the obligation to provide X dwellings to the government entity or its nominee on the terms and conditions set out in Schedule X of the document titled "Project Delivery Deed" [TPDD] dated MM YYYY as though they were the "Developer" set out in that Project Delivery Deed or upon such other terms as may be advised by the government entity; and

(ii) the government entity 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 government entity or its nominee on the terms and conditions set out in Schedule X of the document titled "Project Delivery Deed" [TPDD] dated MM YYYY or such other terms as may be advised by the government entity.

•                     The Crown Lease may be terminated by the government entity in the following circumstances:

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

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

-                     if associated works in accordance with clause X are not completed within the period specified in clause X.

-                     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 X: APDD

The APDD was entered into on the same date as the Contract, being MM YYYY. Its purpose is to set out the obligations of Entity A and the government entity with respect to the development of the Land.

The Parties to the APDD are:

•                     the government entity

•                     Entity A

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

Clause X of the Background states that the APDD includes schedules which outline additional specific obligations which Entity A must comply.

Clause X provides that the term of the APDD commences on the Deed Date and continues until the earlier of:

i) the fulfilment of all the obligations under the APDD; or

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

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

Clause X of the APDD is with respect to Security. In particular:

•      Entity A must provide to the government entity the security amount ($x) for the performance of its obligations under the APDD.

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

•      The Parties have agreed the sum of the Security represents a genuine pre-estimate of the loss of the government entity if the APDD is terminated by the government entity as a result of Entity A failing to comply with its obligations under the APDD.

•      If Entity A breaches any of its obligations under the APDD, the government entity may call on the Security for all costs or losses reasonably incurred by the government entity in respect of or in connection with any loss or damage suffered, arising from Entity A's breach of the APDD and includes any loss or costs in respect of the government entity:

(1)    Carrying out their respective obligations; and /or

(2)    Enforcing their respective rights under the APDD

•      If the government entity calls on the Security, Entity A must renew the Security to the Security Amount and provide the same to the government entity.

•      Entity A agrees, if:

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

(2) the APDD is terminated under clause X,

Entity A releases the Security to the government entity.

•      On the Release Date, to the extent that the government entity has not called on or is not entitled to call on the Security under clause X, the government entity 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 APDD and agrees that the government entity may seek orders for specific performance requiring Entity A to undertake any obligation under the APDD.

Clause X of the APDD provides that Entity A is responsible for the costs of planning, designing, constructing, certifying or operating on/of or in relation to the Land or any Improvements and the government entity is not responsible for meeting any part of those costs. Additionally, Entity A will not make any claim, seek any compensation or reimbursement of any costs in respect of the planning, designing, constructing, certifying or operating on/of or in relation to the Land or any Improvements within it that arise as a result of:

(1)    Requirements of the government entity under the APDD or Contract or any subsequent variations to those documents agreed between the parties.

(2)    Any required changes to any Development Application that the Authority or any relevant Agency requires during the Development Approval process; or

(3)    Any changes that Entity A initiates.

Clause X of the APDD is with respect to Approvals of Relevant Agencies. In particular:

•           Entity A must, at its cost, submit applications to and obtain from the government entity 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 government entity, including:

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

(2) any Approvals.

Clause X of the APDD 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 government entity is required to release the Security under clause X) unless certain conditions are satisfied.

•           On completion of any Disposition for which government entity consent is required under this clause, Entity A must pay to government entity the amount (if any) by which the price payable by the Disponee for the property exceeds the price paid by Entity A to the government entity 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 APDD and each such agreement includes a condition to that effect.

Subclause X of the APDD 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 APDD, Entity A indemnifies the government entity from and against any Claim, expense, costs, loss or damage suffered by the government entity arising out of any failure by Entity A to perform its obligations under the APDD.

Pursuant to subclause X of the APDD, the government entity may terminate the APDD 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 the APDD, 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 APDD, Entity A may terminate the APDD if the government entity defaults in a material respect in the performance of any material obligation under the APDD 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 APDD. 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 APDD. In the event of any inconsistency between any Schedules and any other provisions of this Deed then, to the extent of inconsistency, the Schedules will prevail.

Schedule X - Details, includes the following:

Schedule X - Affordable or Community Housing Requirements,

The following details from Schedule X are set out below:

1.1 Definitions

...

Clause X, is with respect to the 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 APDD.
• The Minimum Number of Affordable or Community Housing Dwellings includes the Minimum Number of Community Housing Dwellings which the Developer must sell in accordance with Schedule X.

Clause X, is with respect to government entity Consultation. In particular,

• This clause sets out the obligations of Entity A to participate in a consultation with the government entity. Clause X is described as an essential term of the APDD.

Clause X, is with respect to Development Application Requirements - Affordable Housing. In particular:

• Within X Working Days of Entity A receiving Development Approval of a Development Application in respect of any Improvements on the Land identified as an Affordable or Community Housing Dwelling by Entity A, Entity A must provide the government entity with:

(1)    copy of the Development Approval;

(2)    a plan of the Land identifying the location of all Dwellings that are the subject of the Development Approval that are intended to be sold by Entity A as an Affordable or Community Housing Dwelling and the estimated Net Liveable Area of such Dwellings, specifically identifying proposed Community Housing Dwellings;

(3)    draft Affordable and Community Housing Contracts for each of the Affordable or Community Housing Dwellings identified in the Development Application that include the Affordable and Community Housing Mandatory Terms,

(4)    proposed marketing materials, such as floor plans, colour palettes and renders,

(collectively the Developer's DA Documents).

• Where the government entity advises Entity A the Developer's DA Documents, or any of them, are unacceptable, Entity A must amend the Developer's DA Documents to be consistent with the APDD.

Clause X, is with respect to the Sale of Affordable Housing and Community Housing. In particular:

• Where the government entity specifies any Identified Buyer as a buyer in respect of Community Housing Dwellings, Entity A must not offer Community Housing Dwellings to Identified Buyers that are not so specified by the government entity unless otherwise agreed.
• Unless otherwise specifically provided for in the APDD, Entity A must only sell Affordable Housing Dwellings:

(1)          to Identified Buyers;

(2)          under Affordable and Community Housing Contracts; and

(3)          consistent with the Developer's DA Documents (including, but not limited to the draft Affordable and Community Housing Contracts) in respect of Affordable Housing Dwellings set out therein.

Clause X is with respect to Mandatory Terms of Affordable and Community Housing Contracts. In particular:

•           Each Affordable and Community Housing Contract must contain the following terms [being the Mandatory Terms]:

(1)          be in a form substantially consistent with the standard contract for the sale of residential land;

(2)          set out a price for the Dwelling at or below the relevant Affordable Housing threshold (as specified in schedule X, subclause X);

(3)          provide that Entity A will accept, on exchange of the contract a part payment of the deposit in the sum of an amount of the greater of one percent of the Price or $X. Notwithstanding, Entity A may (at its discretion) determine requirements for the payment of the balance of the deposit, provided that it is not payable less than X Working Days following the exchange of the contract; and

(4)          provide for the dwelling to be consistent with all requirements of the design brief.

(5)          a warranty from the Developer and the buyer.

Schedule X - Car Parking

Annexure X: TPDD

The TPDD was entered into on the same date as the Contract, being MM YYYY. Its purpose is to set out the obligations of Entity A and the government entity with respect to the development of the Land.

The Parties to the TPDD are:

•      the government entity

•      Entity A.

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

Clause X of the Background states that the TPDD includes schedules which outline additional specific obligations which Entity A must comply.

Clause X provides that the term of the TPDD commences on the Deed Date and continues until the earlier of:

(1)          the fulfilment of all the obligations under the TPDD; or

(2)          the termination of the TPDD by either Party; or

(3)          X years from the date of Completion of the Contract.

Clause X of the TPDD is with respect to Security. In particular:

• Entity A must provide to the government entity the security amount ($X) for the performance of its obligations under the TPDD.
• The Parties have agreed the sum of the Security represents a genuine pre-estimate of the loss of the government entity if the TPDD is terminated by the government entity as a result of Entity A failing to comply with its obligations under the TPDD.
• If Entity A breaches any of its obligations under the TPDD, the government entity may call on the Security for all costs or losses reasonably incurred by the government entity in respect of or in connection with any loss or damage suffered, arising from Entity A's breach of the TPDD and includes any loss or costs in respect of the government entity:

a.   carrying out their respective obligations; and /or

b.   enforcing their respective rights under the TPDD

• If the government entity calls on the Security, Entity A must renew the Security to the Security Amount and provide the same to the government entity.
• Entity A agrees, if:

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

or

(2) the TPDD is terminated under clause X,

Entity A releases the Security to the government entity.

• On the Release Date, to the extent that the government entity has not called on or is not entitled to call on the Security under clause X, the government entity will release to Entity A the Security provided under clause X.
• When Entity A has:

a.   completed all of the Public Housing Contracts; and

b.   all of the Public Housing Dwellings have been transferred to the government entity (or its nominee)

(collectively referred to as the Milestones), Entity A may request the government entity release $X (Milestone Amount) from the Security to the Developer.

• The government entity may reject Entity A's request to release the Milestone Amount:

a. in its absolute discretion; or

b. if in the absolute opinion of the government entity:

                             i.                Entity A has not achieved the Milestone; and /or

                            ii.                Entity A has not complied with:

A. the TPDD;

B. the Crown Lease;

C. the Contract for Sale;

D. the Public Housing Contracts (with exception to any obligation to rectify defects after completion); and/or

E. the conditions of any Development Approval obtained by Entity A in respect of the Land.

• Entity A agrees that damages are an insufficient remedy in respect of a breach of the TPDD and agrees that the government entity may seek orders for specific performance requiring Entity A to undertake any
• obligation under the TPDD.

Clause X is with respect to Costs of Development and Approvals. In particular:

• Clause X of the TPDD provides that Entity A is responsible for the costs of planning, designing, constructing, certifying or operating on/of or in relation to the Land or any Improvements and the government entity is not responsible for meeting any part of those costs.

•    Additionally, Entity A will not make any Claim, seek any compensation or reimbursement of any costs in respect of the planning, designing, constructing, certifying or operating on/of or in relation to the Land or any Improvements within it that arise as a result of:

a. requirements of the government entity under the TPDD or Contract or any subsequent variations to those documents agreed between the parties.

b. any required changes to any Development Application that the government entity or any relevant Agency requires during the Development Approval process; or

c. any changes that Entity A initiates.

Clause X of the TPDD is with respect to Approvals of Relevant Agencies. In particular:

• Entity A must, at its cost, submit applications to and obtain from the government entity 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 government entity, including:

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

(2) any Approvals.

Clause X of the TPDD 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 government entity is required to release the Security under clause X) unless certain conditions are satisfied).
• On completion of any Disposition for which the government entity consent is required under this clause, Entity A must pay to the government entity the amount (if any) by which the price payable by the Disponee for the property exceeds the price paid by Entity A to the government entity 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 TPDD and each such agreement includes a condition to that effect.

Subclause X of the TPDD 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 TPDD, Entity A indemnifies the government entity from and against any Claim, expense, costs, loss or damage suffered by the government entity arising out of any failure by Entity A to perform its obligations under the TPDD.

Clause X is in respect of default and termination

• Pursuant to the TPDD, the government entity may terminate the TPDD 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 the TPDD, 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 the TPDD, Entity A may terminate the TPDD if the government entity defaults in a material respect in the performance of any material obligation under the TPDD 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 TPDD. 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 TPDD. In the event of any inconsistency between any Schedules and any other provisions of the TPDD then, to the extent of inconsistency, the Schedules will prevail.

Schedule 1 - Details, includes the following:

Schedule 2 - Public Housing Requirements,

The following details from Schedule 2 are set out below:

1.1 Definitions

...

Clause X, is with respect to the Minimum Number of Public Housing Dwellings and Transfer Process. In particular:

• Entity A acknowledges and agrees, in consideration for the government entity entering into the TPDD and the government entity entering into the Contract, Entity A must:

a.   enter into Public Housing Contracts for the sale of a number of Dwellings equal to the minimum number of Public Housing Dwellings, on the Land to the government entity or its nominee consisting of:

                       (a)X bedroom Dwellings; and

                       (b)X Bedroom Dwellings;

b.   for payment from the government entity or its nominee of no more than:

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

                       (b)$X (inclusive of GST) per x Bedroom Dwelling,

at the times specified in the referrable public Housing Contracts.

Within X days of the grant of the relevant Unit Titles in respect of the Land, Entity A must transfer the Public Housing Dwellings subject to Public Housing Contracts to the government entity or its nominee in accordance with the terms of the Public Housing Contracts entered into in accordance with the TPDD.

Clause X, is with respect to the government entity Endorsement of the Development Application. In particular:

• Entity A must not lodge with the government entity a Development Application in respect of the Land unless it is accompanied by an Endorsement Letter. The Parties agree this is an essential term of the TPDD.

Clause X is with respect to Developer variation of Development Applications. In particular:

• Entity A must provide the government entity with a copy of any draft Development Application in respect of the Land the Developer proposes to lodge with the government entity prior to lodging the Development Application with the government entity.
• Entity A must not vary or amend any Development Application unless the government entity has issued to Entity A an Endorsement Letter specifically in relation to the Development Application as sought to be varied or amended. This clause ceases to apply from the issue of the Compliance Certificate.

Clause X is with respect to Mandatory Terms of Public Housing Contracts. In particular:

• Each Public Housing Contract must contain the following terms [being the Mandatory Terms]:

(1)       be in a form substantially consistent with the standard contract for the sale of residential land;

(2)       the consideration for purchase of a Public Housing Dwelling;

(3)       an express right for the Buyer to lodge a caveat on the Certificate of Title of the Land

(4)       the initial estimate of body corporate fees and levies must not exceed $X for each Public Housing Dwelling per annum;

(5)       incorporate the Mandatory Specifications and the Design Brief in an inclusions list attached to the Public Housing Contract.

Clause X deals with a Caveat. It provides:

•      The Parties agree that the terms of the TPDD give rise to an interest in Land in favour of the government entity that can sustain a caveat.

Annexure A

Public Housing Design Brief

The Design Brief provides a description of requirements for any new public housing.

Annexure G - Prescribed Conditions for Associated Works

•      The lease is conditional upon the lessee designing and constructing at the lessee's cost, works associated with the lease that are to become assets of a government agency.

•      All works to be handed over to the government agency including roads, stormwater and landscape works shall be designed in accordance with the current specifications.

•      The associated works required are design and construction of:

(a)  A water main from the existing main including the provision of a fire hydrant and any associated infrastructure required to meet fire hydrant requirements.

(b)  Upgrade of sewer main and ties.

(c)   A Heavy-Duty Concrete Vehicle Crossing(s) and Driveway(s);

(d)  Landscaping and paving along unleased government entity land adjoining the land.

(e)  All offsite roadworks to accommodate access and egress in a forward motion of a 12.5 metre long waste vehicle;

(f)    Any other works required by a government agency as a result of an audit on submitted plans for design approval; and

Including all ancillary works and fittings required to complete the associated works.

•      Prior to redevelopment of the site a site-specific unexpected finds protocol (UFP) must be prepared by a suitably qualified environmental consultant and implemented during the development works.

•      The relocation or removal of existing electrical infrastructure will be carried out by the relevant agency at the lessees expense. The lessee will be responsible to liase with relevant Agency in relation to the installation / extension of the electricity networks to electrically service the proposed development and may be required to fund associated costs for these works. It may be necessary for Evo energy Agency to install a substation on the site to provide electricity supply. The requirement to include a substation on site will be determined by the relevant agency ...

•      The lessee may be required to install additional or non-standard earthing.

•      The lessee shall lodge a 'Deed of Unconditional Undertaking', using the prescribed proforma, in the amount of $X including GST prior to the execution of the lease. The undertaking may be reduced (if requested) to $X including GST on Practical Completion of all the works if supported by the relevant agencies. The remainder of the undertaking will be released on Final Completion of every part of the associated works.

•      The lessee will be responsible for practical completion of works within X months of the commencement of the lease and prior to occupation of the premises.

•      If the associated works are not completed within the time specified for Practical Completion, or defects not rectified within the time specified for Final Completion, then the relevant agency may exercise its right in accordance with the 'Deed of Unconditional Undertaking' to the extent to which money derived from the 'Deed of Unconditional Undertaking' is deemed to be necessary for the completion and rectification of the associated works. Such money shall be forfeited to the relevant agency.

•      Practical Completion of the associated works shall be deemed to have occurred when the lessee lodges with the relevant government agency, the 'Certificates of Operational Acceptance' and the 'Provisional Certificate of Operation'.

•      Final Completion of the associated works shall be deemed to have occurred when the lessee lodges with the relevant agency, the 'Certificates of Final Acceptance' and the 'Certificate of Operation' issued. The 'Certificate of Final Acceptance' will be issued by the respective agencies on satisfactory completion of defects at the end of the Defects Liability Period (DLP). The DLP for all assets to be handed over to the relevant agency except soft landscape works (trees, shrubs, grass) shall be X weeks commencing from the issue of the 'Certificate of Operational Acceptance'. The soft landscape works shall be subjected to a minimum of X weeks Consolidation Period before applying for the issue of the 'Certificate of Final Acceptance' for these works.

The Project

Entity A propose the building will be residential with associated car parking. The proposal will most likely include a number of separate towers, it will be classified as unified building under the National Construction Code.

The current expected cost of the development is approximately $X and a development application has not yet been lodged

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 ruling,

• 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 or Approved Development and Associated Works) undertaken by Entity A pursuant to the Contract for Sale, X Project Delivery Deed (APDD),Y Project Delivery Deed (TPDD) and 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 taxable supply of the Land by the government entity under section 9-5 of the GST Act?

Summary

Only to the extent Associated Works described in the transaction documents, 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 Land, they will be consideration, pursuant to section 9-15 for the taxable supply of the land by the government entity to Entity A under section 9-5.

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

• The building works.
• The X public housing units (that are transferred to the government entity or nominee for specified consideration)
• 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 Land).

Detailed reasoning

Subsection 9-15(1) provides that consideration includes:

(a)  any payment, or any act or forbearance, in connection with a supply of anything; and

(b)  any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

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.[1]

Goods and Services Tax Determination GSTD 2021/1 Goods and services tax: development works in the Australian Capital Territory (GSTD 2021/1), 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.

Considering the facts in your situation, the arrangement between the government entity and Entity A has the typical features of the arrangements outlined in GSTD 2021/1.

Undertaking the building works on the land, pursuant to the Transaction Documents does not provide the government agency 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 government entity's supply of the land.

Associated Works

Paragraph 46 of GSTD 2021/1 discusses Associated Works retained by, or transferred to, a government agency. It states:

However, the outcome is different if associated site works are retained by, or transferred to, the government agency or a third party nominated by the government agency (whether on unleased land or the Crown lease land). Performing these works involves the provision of something of measurable economic value to the government agency, because the government agency would otherwise have had to pay to have these works constructed. There is sufficient nexus between the works where the arrangement makes the supply of the land conditional on the developer completing the specified works.

Pursuant to the Transaction documents, the Lease is conditional upon Entity A designing and constructing at Entity A's cost works associated with the Lease that are to become assets of a government agency.

The completed 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 Land) have the requisite nexus and are non-monetary consideration for the taxable supply of the Land by the government entity.[2]

Any completed Associated Works that are retained by Entity A, are not non-monetary consideration for the supply of the Land by the government entity. This is because any Associated Works retained by Entity A provide no measurable economic value to the government entity.

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

Entity A must offer for sale, a number of Affordable or Community Housing Dwellings on the Land under the terms of the arrangement.

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 lease.

Public Housing Dwellings

The Public Housing requirements / arrangements, outlined in Schedule X to the TPDD, are distinct from the building and associated works for the approved development and are not consideration for the supply of the Land.

The consideration for the supply of the Public Housing Dwellings has been determined separately and is a fee for service arrangement.

Question 2

Is the government entity making a creditable acquisition, pursuant to section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), of the Development Works (collectively, the Building Works or Approved Development and Associated Works) undertaken by Entity A pursuant to the Transaction Documents, on the Land?

Summary

Only to the extent Associated Works described in the transaction documents 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 Land).

The following Development Works, undertaken by Entity A, are not creditable acquisitions by the government entity.

(a)  The building works.

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

(c)   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).

Detailed Reasoning

Section 11-5 provides that you make a creditable acquisition if:

a)    you acquire anything solely or partly for a creditable purpose

b)    the supply of the thing to you is a taxable supply

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

d)    you are registered or required to be registered.

Supply of the thing to you is a taxable supply and you provide (or are liable to provide) consideration.

Pursuant to section 9-5, a taxable supply is made where the supply is made for consideration, the supply is in the course or furtherance of an enterprise that is carried on, the supply is connected with the indirect tax zone and the supplier is 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.

In this case, the relevant supplier is Entity A.

The meaning of 'supply' is given in section 9-10. A supply is any form of supply whatsoever and includes:

•         A supply of goods.

•         A supply of services.

•         An entry into an obligation to do anything.

An entity will make a supply when that entity (the supplier) provides something of value to another entity (the recipient)

When Entity A completes Associated Works which 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 Land), Entity A provides something of measurable economic value to the government entity and therefore makes a supply to the government entity.

The supply to the government entity by Entity A will be a taxable supply where there is consideration for the supply as the other requirements of section 9-5 are met.

Paragraph 12 of Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) explains that consideration is not limited to payments of money:

12. A 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form, such as:

- providing goods;

- granting a right or performing a service (an act); and

- entering into an obligation, for example to refrain from selling a particular product (a forbearance).

Paragraph 16 of GSTR 2001/6 states further:

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

Paragraph 50 of GSTR 2001/6 provides that there needs to be a connection between the supply and the payment for the supply to be made for consideration:

50. Section 9-15 further provides that 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. Thus, there must be a sufficient nexus between a particular payment and a particular supply for the payment to be consideration for that supply.

The grant of the long-term lease of the Land by the government entity to Entity A is non-monetary consideration for the supply of the Associated Works undertaken by Entity A on the land, to the extent Associated Works described in the transaction documents 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)

Entity A will, therefore, make taxable supplies to the government entity, as the supplies are neither GST-free or input taxed.

Creditable purpose

Section 11-15 provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise and the acquisitions do not relate to input taxed supplies or acquisitions of a private or domestic nature.

An 'enterprise' is defined in subsection 9-20(1) to be an activity or series of activities done, among other things, by the Commonwealth, a State or a Territory, or a body corporate, or corporation sole, established for a public purpose by or under a law of the Commonwealth, a State or a Territory.

The government entity is carrying on an enterprise.

Conclusion

The government entity's acquisition of the Associated Works, which 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 Land) and completed pursuant to the Transaction Documents will be a creditable acquisition as the requirements of section 11-5 are satisfied.

[1] Goods and Services Determination GSTD 2021/1 Goods and services tax: development works in the Australian Capital Territory (GSTD 2021/1) at paragraph 36

[2] Paragraph 12 of GSTD 2021/1