Edited version of private advice

Authorisation Number: 1052231943158

Date of advice: 15 March 2024

Ruling

Subject:GST - Compulsory acquisitions

Issue 1

Question 1

Is GST payable under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the following amounts received by entity A and entity B

•         compensation and interest received pursuant to the Valuer General's Determination of Compensation, dated DD MM YY in relation to the compulsory acquisition of their leasehold interest in Property A by entity name.

•         reimbursement of cost of court proceedings (party-party costs) in disputing the above-mentioned compensation amount.

Answer

No.

This ruling applies for the following period:

Year ending YYYY

The scheme commenced on:

DD MM YY

Relevant facts and circumstances

Documents provided for this ruling

You provided a number of documents for this ruling.

Entity name

Entity name (ABN: XXXX) (entity A) operates enterprise A. Its core activities are xx activities.

Entity A has been registered for GST since DD MM YY and reports its GST obligations on a monthly and non-cash basis.

Its current directors are individual C and individual D.

Entity name

Entity name as trustee for trust A (ABN XXXX) (entity B) operates enterprise B.

Entity B has been registered for GST since DD MM YY and reports its GST obligations on a quarterly and non-cash basis.

The directors of the corporate trustee company are also individual C and individual D.

Site name

Entity A (since approx. YYYY and entity B (since approx. YYYY have operated their respective enterprises from a site located at address (Site) pursuant to a series of leases entered into with its registered proprietor - entity name.

The Site is formally known as Lot XXXX, XXXX, XXXX, XXXX and XXXX in Deposited Plan XXXX and forms part of Lot XXXX and XXXX in Deposited Plan XXXX

Both entity A and entity B were jointly named as lessee/tenant under the Lease Agreement commencing on DD MM YY and ending on DD MM YY (Site Lease/leasehold interest) executed on DD MM YY. The rent payable under the Site Lease was $xx per annum with annual increases in accordance with the greater of rate% and the Consumer Price Index (CPI).

The expressions 'You/you (or your)' and lessee 'refer collectively to Entity A and Entity B and are used interchangeably throughout this ruling.

Acquisition of the Site by entity name

Entity name is a state Government Agency.

During DD MM YY, entity name notified you that the Site was required for public purpose and attempted to reach agreement on compensation for the acquisition of your leasehold interest in the Site. As an agreement was not reached entity name was required to acquire the leasehold interest under the compulsory acquisition process.

In MM YY, entity name issued you a 'Proposed Acquisition Notice under the relevant legislation.

On DD MM YY entity name published the Notice of Compulsory Acquisition of Land in the State Government Gazette XX (folios XX and XX) acquiring the Site from entity name by compulsory process under the provisions of the relevant legislation for the purposes of the relevant legislation.

The land was acquired for the project name.

You supplied a copy of the acquisition notice published in the State Government Gazette.

The gazettal of the acquisition notice meant that entity name acquired the whole of the Site on DD MM YY, extinguishing all interests in the land including the freehold interest held by entity name (registered proprietor) and the leasehold interest held by you (the lessee).

Although the compulsory acquisition occurred on DD MM YY, vacant possession of the Site did not occur until MM YY

You were entitled to be paid compensation for the extinguishment of your interest in the Site in accordance with Part XX of the relevant legislation. The amount of compensation was to be determined by the State Valuer-General.

Compensation

Prior to the compulsory acquisition, in MM YY, you submitted a joint claim for compensation to the State Valuer-General. There were multiple iterations of the claim as elements of it evolved over the course of the year. The final iteration of the claim was submitted in MM YY and sought compensation in the amount of $xx (entity A) and $xx (entity B), respectively.

On DD MM YY, you and entity name entered into a Deed of Licence and Advance Payment of Compensation under the relevant legislation (the Advance Payment Deed). The Advance Payment Deed facilitated your continued occupation of the land for a specified period of time and the advance payment of compensation of $xx to you, prior to the finalisation of the State Valuer-General's determination on compensation. The advance payments under the Advance Payment Deed were made to you jointly.

On DD MM YY, the State Valuer-General issued a final determination on compensation. The combined amount of compensation was $xx. This amount correlates with the valuation report prepared by the state Valuer-General's contract valuer - Consultant, dated Dd MM YY (the Valuation Report).

As per the Valuation Report, the compensation amount was determined on a 'partial relocation basis' and was entirely ascribed to 'loss attributed to disturbance' under section reference of the relevant legislation.

Paragraph number XX of the Valuation Report provides a high-level breakdown of the $xx figure and allocates the compensation for loss attributed to disturbance between the two entities as follows:

You provided a table illustrating the breakdown.

Compensation itemised as " item ", " item ", " item ", " item " and " item " were allocated to entity A.

Paragraph number of the Valuation Report provided a further breakdown of the $xx awarded to entity A for disturbance loss.

You provided a table illustrating the breakdown.

Paragraph number of the Valuation Report provided a further breakdown of the $xx awarded to entity B for disturbance loss as follows:

You provided a table illustrating the breakdown.

The Compensation Notice advised of your right to object to the amount of compensation offered by entity name.

On DD MM YY, you commenced proceedings in Court (the court proceedings) objecting to the amount of compensation determined by the State Valuer-General. The Respondent to the proceedings was entity name.

After several months of litigation, on DD MM YY, you indicated that you would accept the statutory offer of compensation and discontinue the court proceedings on the basis that entity name would pay your costs of proceedings on a party-party basis.

On DD MM YY, entity name and you agreed on the quantum of the costs of proceedings on a party-party basis, in the amount of $xx.

On DD MM YY, a Notice of Discontinuance was lodged with court. You (as applicants) and entity name (as respondents) agreed to discontinue the court proceedings on the terms set out below:

You provided a copy of the Notice of Discontinuance.

On DD MM YY, the parties executed the Deed of Release and Indemnity. In consideration of the advance payments and final payment of compensation and the costs of proceedings you agreed to the following:

(a)  release unconditionally and forever all claims, demands, entitlements and causes of action which you had or assert to have had or could, would or might but for this release have against entity name for or in respect of the compulsory acquisition of the Site and the Proceedings; and

(b)  to indemnify and keep indemnified entity name from and against any and all claims that may be made against entity name in respect of the extinguishment of your leasehold interest in the Site caused by the compulsory acquisition, and all claims that may be made against entity name in the Proceedings.

Summary of compensation payments made by entity name

Payments under the Advance Payment Deed

The following payments (totalling $xx) were made to entity A's nominated account under the Advance Payment Deed:

(a) $xx on DD MM YY

(b) $xx on DD MM YY

(c) $xx on DD MM YY

(d) $xx on DD MM YY

Payment upon commencing the court proceedings.

When you commenced the court proceedings, you were entitled under the statute to rate% of the Valuer-General's determination on compensation. On DD MM YY, entity name paid an additional amount of $xx into entity A's nominated account.

This figure was equal to rate% of the Valuer-General's determination of $xx, minus the advance payments to date ($xx), plus the statutory interest accrued since the date of acquisition (DD MM YY) at a rate of rate% p.a.

Payment upon discontinuing the court proceedings

On DD MM YY, entity name made a payment of $xx to entity name (your legal representatives) trust account, which was then transferred in full to entity A's nominated account. This amount reflected the unpaid balance of the State Valuer-General's determination on compensation, plus statutory interest accrued.

In summary the amounts paid by entity name up until DD MM YY comprised of $xx in compensation as per the State Valuer-Generals determination and $xx in interest accrued.

On DD MM YY, entity name made a payment of $xx to entity name trust account, which was then transferred in full to entity A's nominated account. This amount reflected the agreed amount of legal costs of the proceedings.

Relevant Legislation

Relevant extracts from relevant legislation were considered.

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

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

Section 9-40 provides that you are liable for GST on any taxable supplies that you make.

You make a taxable supply where you satisfy the requirements of section 9-5, which provides:

(a)          you make the supply for consideration; and

(b)          the supply is made in the course or furtherance of an enterprise that you carry on; and

(c)          the supply is connected with the indirect tax zone; and

(d)          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.

Supply

The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under the GST Act. For there to be a taxable supply, there must be a supply. The term 'supply' is broadly defined in subsection 9-10(1) as being any form of supply whatsoever. Subsection 9-10(2) provides a non-exhaustive list of things that are included as supplies. These include:

(a)          a supply of goods;

(b)          a supply of services;

(c)          a provision of advice or information;

(d)          a grant, assignment, or surrender of real property;

(e)          a creation, grant, transfer, assignment or surrender of any right;

(f)          a financial supply;

(g)          an entry into, or release from, an obligation:

(i)            to do anything; or

(ii)            to refrain from an act; or

(iii)            to tolerate an act or situation;

(h)          any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

The meaning of the term 'supply' is discussed in Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR2006/9).

GSTR 2006/9 discusses a number of propositions for characterising supplies and analysing more complex transactions. Paragraphs 71 to 91 of GSTR 2006/9 concern proposition five which provides an entity will make a supply if it provides something to another entity. This can be by means of doing some act or by means of refraining from acting or by tolerating some act or situation,

Paragraphs 80 to 84 of GSTR 2006/9 provide guidance on the legal effect of a legislative acquisition of real property rights as follows:

Extinguishment of real property rights

80. Various government authorities are empowered by legislation to acquire an interest in real property. Two common mechanisms employed by legislation are:

•           the vesting of the interest in the relevant government authority and extinguishing any previous interests in the real property; and

•           the particular statute may allow the government authority to acquire the real property by agreement.

Vesting in the government authority

81. An example of vesting is provided by section 20 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), where the required acquisition notices are gazetted, the relevant land is:

•           'vested in the authority of the State acquiring the land'; and

•           'freed and discharged from all estates, interests, trust, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land'.

The entity whose interest in the land is extinguished is compensated for the loss of that interest. That entity may agree to the compensation determined by the Valuer-General and execute a form of release. If the entity disputes the compensation amount, there is provision for payment of 90% of the initial valuation until the matter is resolved.

82. The effect of the gazettal notice is that the legal ownership of the land, described in the notice, is vested in the authority acquiring the land, and that the land becomes freed from any other interests. The entity's interest in the land, whether legal or equitable, is extinguished. When land vests in an authority in consequence of a gazettal notice, it is necessary to examine the relevant facts and circumstances to determine whether or not the owner makes a supply of the land to the authority. In cases where land vests in the authority as a result of the authority seeking to acquire the land, and initiating the compulsory acquisition process pursuant to its statutory right, then the owner does not make a supply. This is because the owner does not provide anything to the authority. It takes no action to cause its legal interest to be transferred or surrendered to the authority. It has no obligation to do anything, to refrain from doing something or to tolerate an act or situation.

82A. However, in other cases the owner may provide something or undertake some action so that it does make a supply of the land that vests in the authority. For example, see the decision in Re Hornsby Shire Council v. Commissioner of Taxation in which the Administrative Appeals Tribunal found that, in the circumstances the owner, CSR Limited, made supplies by way of entry into obligations as well as by surrender of land when it issued a notice.

83. Some statutes provide that land remaining, where only part of the land (the 'target land') is to be compulsorily acquired, will also be compulsorily acquired if the owner and the acquiring authority agree that the remaining land will be of no practical use or value to the owner. In cases where, prior to the vesting of the target land, the owner and authority agree that the remaining land will also be acquired, and the remaining land is acquired contemporaneously with the target land, it is the Commissioner's view that the owner does not make a supply of the remaining land to the acquiring authority. Although the owner may have requested that the remaining land be acquired, the agreement reached between the parties, and the resulting acquisition of the remaining land is integral, ancillary or incidental to the compulsory acquisition of the target land.

83A. In contrast to the circumstances described in paragraph 83 of this Ruling, the land owner may, at a time subsequent to the authority's acquisition of the target land, request that the authority acquire the remaining land on the basis that it is of no practical use or value to the owner. Consistent with the decision in Re Hornsby Shire Council v. Commissioner of Taxation, in these circumstances it is the Commissioner's view that the owner has taken some action by requesting that the remaining land be acquired and makes a supply of the remaining land by way of surrender to the authority. In such cases, the acquisition of the remaining land is not integral, ancillary or incidental to the authority's compulsory acquisition of the target land.

84. Mere acceptance by an owner of an amount of compensation payable on the compulsory acquisition does not provide a sufficient nexus between the land which passes and the means by which it passes. The fact that the owner does not dispute the acquisition is not an activity that effects the supply of the land. Even if the owner agrees to the terms of the acquisition and the amount of compensation, the land is acquired by operation of the statute, upon publication of the acquisition notice, not by an action taken by the landowner.

Goods and Services Tax Ruling GSTR 2001/4 Goods and services tax: GST consequences of court orders and out-of-court settlements (GSTR 2001/4) further explains the meaning of the term 'supply'. Paragraph 25 of GSTR 2001/4 states:

25. Subsection 9-10(2) refers to two aspects of a supply; the thing which passes, such as goods, services, a right or obligation; and the means by which it passes, such as its provision, creation, grant, assignment, surrender or release.

GSTR 2001/4 provides further that three types of supplies could be made under an out-of-court settlement arrangement. They are an 'earlier supply' a 'current supply' and a 'discontinuance supply'.

In accordance with paragraph 46 of GSTR 2001/4, where the subject of the dispute is an earlier transaction in which a supply was made involving the parties, that supply is referred to as an 'earlier supply'.

In accordance with paragraph 48 of GSTR 2001/4, a new supply may be created by the terms of the settlement. Such a supply is referred to as a 'current supply'.

Paragraphs 50 to 55 of GSTR 2001/4 discuss supplies related to discontinuance of action and state as follows:

50. Even where there is no earlier or current supply, the very wide range of things that can constitute a 'supply' means that one or more new supplies will probably crystallise on an out-of-court settlement being reached.

51. Generally (it is suggested in most if not all cases), the terms of a settlement, in finalising a dispute, will ensure no further legal action in relation to that dispute, provided that the terms of the settlement are complied with. This often takes the form of a plaintiff releasing a defendant from some (or all) of the existing claims and from further claims and obligations in relation to that dispute.

52. Sometimes, where a dispute involves counter claims, the terms of the settlement may provide for each party to release the other from such claims and obligations.

53. Where court proceedings have commenced, the filing of a notice of discontinuance pursuant to the relevant court rules may also be required to ensure the court is advised that a particular action will not proceed.

54. We consider that these conditions of settlement can create supplies for GST purposes. The supplies may be characterised as:

(i)            surrendering a right to pursue further legal action [paragraph 9-10(2)(e)]; or

(ii)            entering into an obligation to refrain from further legal action [paragraph 9-10(2)(g)]; or

(iii)            releasing another party from further obligations in relation to the dispute [paragraph 9-10(2)(g)].

55. In this Ruling, we refer to supplies of these kinds as 'discontinuance supplies'. However, whether a discontinuance supply would be a taxable supply would then depend on the requirements of section 9-5 being met in relation to that supply.

Consideration for a supply

Additionally, a supply is a taxable supply, if among other things, the supply is made for consideration. Consideration is defined in section 195-1 to mean 'any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply. The meaning given to consideration in section 9-15 extends beyond payments to include such things as acts and forbearances. It may include payments made voluntarily, and payments made by persons other than the recipient of the supply.[1]

Section 9-15 provides that a payment will be consideration for a supply if the payment is 'in connection with' a supply and 'in response to' or 'for the inducement' of a supply. Thus, there must be a sufficient nexus between a particular supply and a particular payment, which is provided for that supply, for there to be a supply for consideration.[2]

Subsection 9-15(2A) makes it clear that the fact that a payment is made in compliance either with a court order, or with a settlement relating to proceedings before a court will not, without more, prevent it from being consideration for a supply.[3]

Subsection 9-15(2A) states:

(2A) It does not matter:

(a)          Whether the payment, act or forbearance was in compliance with an order of court, or of a tribunal or other body that has the power to make orders; or

(b)          Whether the payment, act or forbearance was in compliance with a settlement relating to proceedings before a court, or before a tribunal or other body that has the power to make orders.

A sufficient nexus between a payment made under an out-of-court settlement and a supply must exist to create the 'supply for consideration' relationship.

In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description which parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made.

Where a sufficient nexus exists between the payment made under a settlement and an earlier supply, a current supply or a discontinuance supply, the payment will be consideration for that supply.

In relation to discontinuance supplies, paragraph 106 to 109 of GSTR 2001/4 states:

Discontinuance supply

106. Where the only supply in relation to an out-of-court settlement is a 'discontinuance' supply, it will typically be because the subject of the dispute is a damages claim. In such a case, the payment under the settlement would be in respect of that claim and not have a sufficient nexus with the discontinuance supply.

107. In most instances, a 'discontinuance' supply will not have a separately ascribed value and will merely be an inherent part of the legal machinery to add finality to a dispute which does not give rise to additional payment in its own right. They are in the nature of a term or condition of the settlement, rather than being the subject of the settlement.

108. We do not consider that the inclusion of a 'no liability' clause in a settlement deed alters this position. 'No liability' clauses are commonly included in settlement agreements and we do not consider their inclusion to alter the substance of the original dispute, or the reason payment is made.

109. We consider that a payment made under a settlement deed may have a nexus with a discontinuance supply only if there is overwhelming evidence that the claim which is the subject of the dispute is so lacking in substance that the payment could only have been made for the discontinuance supply.

Paragraphs 71 to 73 and 110 to 111 of GSTR 2001/4discusses circumstances where the subject of court disputes/claims are not supplies:

71. Disputes often arise over incidents that do not relate to a supply. Examples of such cases are claims for damages arising out of property damage, negligence causing loss of profits, wrongful use of trade name, breach of copyright, termination or breach of contract or personal injury.

72. When such a dispute arises, the aggrieved party will often assert its right to an appropriate remedy. Depending on the facts of each dispute a number of remedies may be pursued by the aggrieved party in order to ensure adequate compensation. Some of these remedies may be mutually exclusive but it is still open to the aggrieved party to plead them as separate heads of claim until such time as the matter is resolved by a court or through negotiation.

73. The most common form of remedy is a claim for damages arising out of the termination or breach of a contract or for some wrong or injury suffered. This damage, loss or injury, being the substance of the dispute, cannot in itself be characterised as a supply made by the aggrieved party. This is because the damage, loss, or injury, in itself does not constitute a supply under section 9-10 of the GST Act.

110. With a dispute over a damages claim, the subject of the dispute does not constitute a supply made by the aggrieved party. If a payment made under a court order is wholly in respect of such a claim, the payment will not be consideration for a supply.

111. If a payment is made under an out-of-court settlement to resolve a damages claim and there is no earlier or current supply, the payment will be treated as payment of the damages claim and will not be consideration for a supply at all, regardless of whether there is an identifiable discontinuance supply under the settlement.

Paragraph 145 to 149 of GSTR 2001/4 provides that court ordered or out-of-court settlements of payments relating to reimbursement of costs incurred by a party in bringing or defending their claim (known as party-party costs) are compensation for costs or losses incurred in the dispute and will be treated in the same manner as damages. Therefore, party-party costs will not be consideration for an earlier or current supply and will not constitute a supply under section 9-10 of the GST Act.

Application to your circumstances

By publication of the Notice of Compulsory Acquisition of Land in the Government Gazette dated DD MM YY, the legal ownership of the land described in the notice (which included the Site) vested in the authority acquiring the land, entity name, and that land became freed from any other interests.

Effective from DD MM YY, the legal and equitable interests (including your leasehold interest in the Site) were extinguished and you became entitled to monetary compensation pursuant to section reference of relevant legislation for your consequential losses.

As you were unable to reach agreement on compensation prior to the compulsory acquisition, the amount payable by entity name was determined in accordance with the State Valuer General's determination of compensation.

The compensation amount of $xx was derived on a 'partial relocation' basis and was entirely ascribed to 'loss attributed to disturbance' under section reference of the relevant legislation. As this amount was considerably less than your estimated consequential losses from the extinguishment of your leasehold interest in the Site, you commenced court proceedings against entity name objecting to the compensation determination.

After several months of litigation, you agreed to the State Valuer-General's determination of compensation in the amount of $xx plus statutory interest for the extinguishment of your leasehold interests in the Site on the basis that entity name also reimburse you for your costs of court proceedings on a party-party basis. In the Deed of Release and Indemnity you agreed to release entity name from any further claims in relation to the Site and the proceedings.

To determine whether you made a supply within the meaning of the GST Act when your leasehold interests in the Site were extinguished on its compulsory acquisition by entity name, we need to examine whether any of the activities or obligations you entered into can be characterised as a 'supply' and whether there is sufficient nexus between the payments you received and any type of supply you may have made.

Compensation for losses attributed to disturbance and statutory interest

The Commissioner, in paragraph 82 of GSTR 2006/9, considers that the compulsory acquisition of land from an entity does not involve a "surrender" or other supply unless the entity has taken some action to cause its legal interest to be transferred or surrendered to the relevant authority. This principle applies to legal ownership of the compulsorily acquired land as well as other equitable interests over that land including leasehold interests.

In your case the Site's compulsory acquisition process was initiated by the entity name under its statutory right pursuant to relevant legislation. You did not take any action to cause the legal and equitable interests in the Site to be transferred or surrendered to the authority. Whilst you took steps to achieve the highest possible amount of compensation for your losses, the compulsory acquisition and extinguishment of all existing interests in Site occurred as a result of the operation of statute and regardless of this action or any other action you took. The leasehold interest in the land was divested from you (the lessee) by the operation of the relevant legislation upon the gazettal of the compulsory acquisition notice.

Paragraph 84 of GST2006/9 explains the mere acceptance of an amount of compensation payable on the compulsory acquisition does not provide a sufficient nexus between the land or interest which passes and the means by which it passes. Even if the owner agrees to the amount of compensation and the terms of the acquisition (which may include the execution of a Deed of Release and Indemnity as required under subsection reference of the relevant legislation), the land or interest is acquired by the operation of the statute and not by an action taken by the owner.

For an entity to make a taxable supply, it must make a supply. Based on the facts, we consider you did not be make a supply as defined in section 9-10 as a result of the compulsory acquisition of the leasehold interest in the Site by entity name.

Furthermore, we consider that the payment of compensation and interest under section reference and reference of the relevant legislation respectively, is not 'consideration' for a supply. A supply must exist to create a 'supply for consideration'. Paragraph 73 of GSTR 2001/4 provides that payments for damages, loss or injury cannot be characterised as a supply because the damage loss or injury in itself does not constitute a supply under section 9-10. Therefore, the compensation payment and interest you received which relate to damages suffered by you as the lessee for the loss suffered from the extinguishment of your leasehold interest in the Site and does not relate to a supply or an earlier supply made by you.

Notably, a new supply was not created by the Terms of the Discontinuance nor the Deed of Release and Indemnity. Hence the compensation payment and interest does not relate to a 'current supply' either.

Entering into an obligation to refrain from further legal action or releasing another party from further obligations in relation to a dispute - known as a discontinuance supply, may constitute a taxable supply providing all requirements of section 9-5 are met. Whilst under the Deed of Release and Indemnity you agreed to release entity name from any further claims in relation to the Site and the Court Proceedings, we do not consider there is sufficient nexus between the compensation and interest payment you received and the discontinuance supply. As explained in paragraphs 106 and 107 of GSTR 2001/4, where the discontinuance supply is merely an inherent part of the legal machinery to add finality to a dispute which does not give rise to additional payment in its own right and is a mere condition of the settlement rather than being the subject of the settlement, the payment is considered to be in respect of the claim and not the discontinuance supply. Therefore, we consider the payment from entity name relating to losses attributed to disturbance and statutory interest correlates solely to compensation in relation to losses you suffered from the extinguishment of your leasehold interest in the Site.

Notably, even when there is an identifiable discontinuance supply under an out-of-court settlement, paragraph 111 of GSTR 2001/4 provides that payments made under an out-of-court settlement to resolve damages claim where there is no earlier or current supply as in this case, the payment will be treated as payment of the damages claim and will not be consideration for a supply at all.

As you did not make a 'supply' nor a 'supply for consideration', the requirements of subsection 9-5(a) were not satisfied.

Reimbursement of party-party costs

In accordance with paragraph 148 of GSTR 2001/4, the payment to reimburse a party for court costs incurred in the dispute is essentially a payment of compensation and is treated in the same manner as damages. Consequently, the payment you received for party-party costs is not consideration for a supply.

As you did not make a supply for consideration the requirements of subsection 9-5(a) were not satisfied.

Conclusion

GST is not payable under section 9-40 of the GST Act on the compensation payments received from entity name for losses attributed to disturbance and statutory interest payable under relevant legislation and for reimbursement of party-party costs,

[1] GSTR 2001/4 paragraph 74

[2] GSTR 2001/4 paragraph 75

[3] GSTR 2001/4 paragraph 97