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ATO Issues Alert on GST Scheme

February 2004

On 8 January 2004, the ATO issued a Taxpayer Alert (TA 2004/2), warning property developers that a GST joint venture scheme to minimise GST on the sale of new residential premises is being investigated. In a Media Release (NAT 04/01, 8 January 2004), the Tax Commissioner stated that the Alert is a precursor to a final ruling or determination in the next few months.

The identified arrangement was described as the forming of a GST joint venture for the purpose of creating an ‘internal sale’ of new home units/house by the joint venture operator (developer) to a participant of the joint venture (marketer). The ‘internal sale’ is not subject to GST because it is within the context of the GST joint venture. A GST input tax credit claim is made, and also the sale of the units/houses by the joint venture developer to customers is claimed to be not subject to GST as the premises are claimed to be no longer ‘new residential premises’.

The ATO has questioned whether the structures adopted are true GST joint ventures; whether it is a joint venture; whether the ‘internal sale’ is in the course of activity for which the joint venture was entered into or in the developer’s capacity as the joint venture operator; and whether the anti-avoidance provisions of Division 165 of the GST Act apply. There are currently a number of rulings and determinations on GST joint ventures, upon which Baldwins can advise.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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