ATO Rulings and Determinations
Sale and purchase of lessor’s reversion
30.11.2009
The recent decision of the Full Federal Court in South Steyne Hotel Pty Ltd v FCT ([2009] FCAFC 155) has created some uncertainty about the GST consequences of a sale by a lessor of its reversionary interest in these premises. In a decision impact statement issued on 30 November 2009 the Commissioner has set out his present views on the way the GSTA applies in such a case. These views are a public ruling and are as follows:
- the purchaser of a reversion is liable for GST relating to the lease for the remaining period of the continuing lease to be attributed in accordance with the attribution rules;
- there is some tension in the conclusion that the purchaser of a reversion does not make a new or further supply by way of lease, but that there is a continuing supply by way of lease, and the requirement for the supplier of a taxable supply to issue a tax invoice. The ATO will treat a document issued by the current owner of leased premises as a tax invoice if it otherwise qualifies as a tax invoice, including where the lease was granted by a previous owner;
- if the premises are residential premises, the continuing supply remains input taxed and input tax credits will be denied on acquisitions by the current owner that relate to the continuing supply by way of lease, including where the lease was granted by a previous owner; and
- the ATO will continue to administer the GSTA in relation to strata titled hotel developments in accordance with the principles set out in GSTR 2000/20. While the decision in the South Steyne case indicates that there is no new or further supply by way of lease by an investor who purchases a unit that is leased to an operator, it also indicates that there is a continuation of the original supply by way of lease upon the grant of the lease. The investor, even if registered, is not entitled to input tax credits on acquisition of the unit or associated acquisitions, such as legal services, insurance, cleaning, maintenance and commissions. In that regard, sec 11-15(2)(a) GSTA does not require, for the denial of input tax credits, that the acquisition relates to the making of input taxed supplies by the acquirer of the relevant acquisition.
For the text of the decision impact statement, click here.
