GST implications of $113m Development Services considered by the recently commenced Administrative Review Tribunal

Courtney Ensor, leading Mark Gioskos, successfully appeared for the Commissioner of Taxation in one of the first published decisions of the Administrative Review Tribunal of Australia, SFQV v Commissioner of Taxation [2024] ARTA 9.

A property developer acquired a significant parcel of land in the Australian Capital Territory from the ACT Land Development Agency (LDA), by way of the grant of a Crown Lease. For this it paid $5.4m and agreed to develop the land including by the construction of hundreds of residential apartments (Development Services). The total consideration for the supply of the Development Services exceeded $113m. If the developer did not complete the Development Services within a specified time, the LDA had a contractual right to terminate the Crown Lease. The Commissioner issued a private ruling to the developer, ruling that the Development Services constituted non-monetary consideration for the developer’s acquisition of the land from the LDA.

The developer disputed the GST payable under the margin scheme on the sales of the apartments and the Commissioner’s decision not to apply s 142-15(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) so as to treat s 142-10 of the GST Act as having never applied.

Numerous issues arose for consideration, with the Commissioner succeeding on each. In particular:

1. The Tribunal accepted that the grant of the Crown Lease was consideration for the supply of the Development Services, recognising that there is no requirement in the GST Act for consideration to be unconditional.
2. The Tribunal held that a monetary amount which the developer had received from the LDA in reliance on a contractual GST gross-up clause (being an amount equivalent to the GST liability on the developer’s supply of the Development Services) did not represent consideration which the developer had provided to the LDA for the acquisition of the land.
3. The Tribunal rejected the developer’s contention that there was no excess GST due to an “effective netting-off” of under-reported and over-reported GST, instead accepting that the excess GST was a reference to the over-reported GST with respect to a particular supply.
4. The Tribunal held that the developer had failed to prove that it did not pass on any excess GST to purchasers of the residential apartments.
5. The Tribunal was not satisfied that the developer had discharged its burden of proving that the Commissioner’s decision not to apply s 142-15(1) should not have been made or should have been made differently, concluding that refunding overpaid GST would result in a windfall gain to the developer.

A copy of the Tribunal’s reasons can be found here.

Courtney conducts a broad commercial practice, with a specialisation in tax law. Enquiries about whether Courtney has availability to accept your brief can be directed to the clerk of New Chambers, Angela Noakes.