Other ATO Developments
Taxpayer alert: GST and construction of residential premises
17.02.2009
A taxpayer alert has been issued in relation to an arrangement where an entity uses an associate in an attempt to secure input tax credits on the construction of residential premises for lease and defer the corresponding GST liability, in some cases indefinitely (TA 2009/5).
The arrangements to which the taxpayer alert applies have some or all of the following features:
(1) A land owner, who may or may not be registered for GST, plans to construct residential premises to lease to third parties.
(2) The land owner engages its associate to construct the residential premises.
(3) The associate either undertakes the construction or engages an arm’s length builder, and claims input tax credits on its acquisitions.
(4) The associate does not seek progress payments from, nor issues an invoice to, the land owner until the premises are ultimately sold.
(5) The land owner leases the completed residential premises to third parties (an input taxed supply).
(6) The associate only remits GST upon the sale of the residential premises by the land owner.
