Edited version of private advice

Authorisation Number: 1052036099808

Date of advice: 22 November 2022

Ruling

Subject: GST - supply of residential premises

Question 1

Are the supplies made under the Scheme a taxable supply of interests in new residential premises or a composite supply?

Answer

Where the premises supplied under the Scheme are newly constructed, they will be a taxable supply of new residential premises, not a composite supply.

Question 2

Where an interest is sold in a new residential premises to a Buyer, under the Scheme, is the seller entitled to full input tax credits on acquisitions in connection with that supply?

Answer

Yes.

Question 3

Is the entity entitled to claim any claimed or unclaimed input tax credits for the previous 4 years?

Answer

Yes.

The scheme commences on:

The date of issue of this private ruling.

Relevant facts and circumstances

A State Government has designed a Scheme to improve the public's access to secure, appropriate and affordable housing.

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 section11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

Reasons for decision

You make a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 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.

Section 11-15 of the GST Act states:

(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 do not make supplies for private or domestic purposes. Therefore, whether you are entitled to claim input tax credits and, if so, to what extent, is dependent upon whether the acquisitions you make relate in any way to supplies that are input taxed.

What is being supplied?

The entity is making a supply of a freehold interest in residential premises to the Buyer when they enter into the Scheme. The supply of newly constructed premises is a transfer of an interest in real property that is new residential premises. The interest that is originally sold under the Scheme (both fixed and flexible) is XX%.

The supply of the interest by HA to a Buyer is a taxable supply of an interest in new residential premises under section 9-5 of the GST Act.

Additionally, under the Scheme, the provision of any part of the remaining XX% interest to the Buyer is also a taxable supply because that interest has not been previously supplied as new residential premises.

Is there a supply of a right to occupy?

A tenant in common holds an undivided share in the property and has unity of possession. This means that each co-tenant has an equal right to possession of the whole of the property, but not a right to exclusive possession of any part. The entity is not supplying a right to occupy the remaining XX%.

Waiver of right to occupy

The entity, as a tenant in common, would usually have a right to occupy the whole of the property. However, under the Deed, the entity waives its right to occupy its interest in the property. The waiver or surrender of a right is a supply under the definition of supply in section 9-10 of the GST Act.

The Co-Owners Deed states that in consideration for the waiver of this right, the buyer is required to undertake a number of obligations.

Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration discusses:

80. [...] Consideration for a supply may include acts, rights or obligations provided in connection with, in response to, or for the inducement of a supply. However, things such as acts, rights and obligations can often be disregarded as payments as they do not have economic value and independent identity separate from the transaction.

81. For a thing to be treated as a payment for a supply, it must have economic value and independent identity provided as compensation for the making of the supply. That is, it must be capable of being valued and be a thing that an acquirer would usually or commercially pay money to acquire. Whether this requirement is satisfied will usually be demonstrated by the parties to an arrangement assigning a specific or separate value to the thing. However, the assigning of a value by the parties is not necessary for a thing to have economic value.

82. Whether a payment is consideration for a supply depends on the true character of the transaction. Consideration for a supply is something the supplier receives for making the supply. Although a non-monetary payment (and acts or forbearances) can form consideration, the character of the transaction will determine whether it forms part of the consideration received by the supplier for making the supply.

Any failure by a Buyer to meet their obligations under the Scheme, can be remedied by the supplier exercising the option to purchase the Buyer's interest in the property.

Notably, the failure by a Buyer to meet their obligations under the Deed is never remedied by the entity exercising it's right to occupy. As such, while the Buyer's obligations do form part of the consideration for the entity's supply under the Deed, there is an insufficient nexus to the supply of the waiver of the right to occupy. Therefore, the only taxable supply that the entity makes under the Scheme is the supply of the XX% interest in the property (fixed or flexible) and potentially the additional XX% interest (flexible).

Future sales of residential premises that are not new

You have stated that at times you buy back a Buyer's XX% interest in the property to keep up with the demand for the properties from other Buyers. When you re-sell the same XX% interest in the property to another Buyer it is an input taxed supply.

It is considered that when you make acquisitions in relation to the developing and building of the premises these acquisitions do not relate to making potential future input taxed supplies. The second supply only relates to the entity acquisition (buy back) of the premises from the first Buyer. Therefore, any future input taxed supplies of interests in the property do not prevent the acquisitions of developing and building the premises to be solely for a creditable purpose.

Claiming input tax credits

Generally, if you have an outstanding input tax credit for an acquisition, you don't need to revise an earlier activity statement. Instead, providing you hold a valid tax invoice, you can claim the input tax credit in the next activity statement you lodge providing the activity statement is lodged within the four-year time limit for claiming the input tax credit.

The time limit for claiming an input tax credit for a purchase you make ends four years from the due date of the earliest activity statement in which you could have claimed the credit.

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