ATO ID 2004/303: GST and supply of residential premises together with assignment of development consent
Date of decision: 5 December 2001
Business line: Indirect Tax

Issue
Is the entity, a property developer that is making an input taxed supply of residential premises, making a separate taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when under a contract of sale, it assigns to the purchaser a development consent that runs with the premises?

Decision
No, the entity is not making a separate taxable supply under section 9-5 of the GST Act when under a contract of sale it assigns to the purchaser a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent.

Facts
The entity is a property developer. The entity is selling residential premises. The sale of the residential premises is an input taxed supply under section 40-65 of the GST Act. Prior to the sale, the entity obtained a development consent in relation to the residential premises. Under the contract of sale, the entity formally assigns that development consent to the purchaser. The development consent is attached to the land and runs with the land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Section 9-5 of the GST Act sets out the requirements that must be satisfied for a supply to be a taxable supply. It further provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed. Before determining whether a taxable supply is being made in relation to the development consent, the substance of the supply or supplies must be established. That is, in relation to the formal assignment of the development consent, it must be determined whether the entity is making a separate supply from its input taxed supply of the residential premises. The development consent is attached to the land belonging to the residential premises and runs with that land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. This transfer takes place regardless of the formal assignment in the sale contract. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself. Therefore, the entity is not supplying the purchaser with anything more than the residential premises. The formal assignment of the development consent does not amount to a separate supply because it does not effect the transfer of anything that was not already transferred to the purchaser as a direct and natural consequence of the sale of the premises. As such, the entity is not making a separate taxable supply under section 9-5 of the GST Act when it assigns to the purchaser, under the contract of sale, a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent. Note: Where a formal assignment of the development consent effects a transfer of something more than that resulting naturally from the transfer of the land itself, the additional assignment may be a separately identifiable supply, which may be a taxable supply where all of the requirements of section 9-5 of the GST Act are satisfied.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 40-65
Subject references: Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST supply Taxable supply Input taxed supplies