ATO ID 2004/181: GST and attribution rules on a taxable supply of land where consideration is received on an instalment basis
Date of decision: 28 October 2003
Business line: Indirect Tax

Issue
Is the entity, a property developer, required to apply the attribution rules in accordance with section 29-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser?

Decision
Yes, the entity is required to apply the attribution rules in accordance with section 29-5 of the GST Act and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser.

Facts
The entity is a property developer. The entity is registered for GST and accounts for GST on a non-cash basis. The entity makes a taxable supply of land to a purchaser. The entity and the purchaser sign a contract and under the terms of the contract, the purchaser agrees to pay the purchase price by making several equal, monthly instalments over an extended period of time. The first instalment is not held by the entity as security for performance of the contract. The contract does not satisfy the requirements under subsection 29-70(1) of the GST Act to be a tax invoice or the requirements in goods and services tax ruling (GSTR) 2000/34 to be an invoice for GST purposes. The entity does not issue an invoice or tax invoice to the purchaser prior to the purchaser making the first instalment payment. The certificate of title to the land will not pass from the entity to the purchaser until the final instalment has been paid.

Reasons for decision
Summary: Section 29-5 of the GST Act sets out the rules that determine the tax period in which an entity is required to attribute the GST payable on a taxable supply. Subsection 29-5(1) of the GST Act determines the tax period in which an entity is required to attribute the GST payable when it accounts for GST on a non-cash basis. As the entity accounts for GST on a non-cash basis, it is the relevant provision to be considered. Under this subsection the GST payable on a supply is attributable to: The contract between the entity and the purchaser does not satisfy the tax invoice requirements under subsection 29-70(1) of the GST Act or the requirements in GSTR 2000/34 to be an invoice for GST purposes. The entity does not issue an invoice or a tax invoice to the purchaser prior to the purchaser making the first instalment payment. As such, the second element of subsection 29-5(1) of the GST Act is not applicable. Where the attribution rules of subsection 29-5(1) of the GST Act are applicable, the entity is required to attribute all of the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser. However, Goods and Services Tax Ruling, GSTR 2000/28, provides special rules on attributing the GST payable on a sale of land under what is termed a 'standard land contract'. Paragraph 25 of GSTR 2000/28 provides that the GST payable on a supply of land under a standard land contract is attributed to the tax period in which settlement occurs and not at the time when the deposit is paid. This is because the deposit made under a standard land contract is taken to be a deposit made as a security to which Division 99 of the GST Act applies. For the purposes of GSTR 2000/28, paragraph 13 defines a standard land contract to be a written contract for the sale of land that provides for: An agreement, which requires a purchaser to provide the purchase price to a vendor in the form of a number of instalments, as opposed to a deposit and a final payment upon settlement, is not a standard land contract for the purposes of GSTR 2000/28. Under the terms of the contract with the entity, the purchaser agrees to make payments, by monthly instalments, over an extended period of time. The purchaser does not pay a deposit that is to be forfeited for failure to perform the obligations under the contract. The certificate of title to the land will not pass, from the entity to the purchaser, until the final instalment has been paid. As such, the entity is not supplying the land under a contract that is regarded as a standard land contract for the purposes GSTR 2000/28. Therefore, the entity is required to apply the attribution rules in accordance with section 29-5 of the GST Act and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser. Note: Division 99 of the GST Act does not apply to change the attribution rules as the first instalment is not a deposit taken as security for the performance of the obligations under the contract.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 29-5 subsection 29-10(1) subsection 29-10(2) paragraph 29-5(1)(a) Division 99
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2000/28 | Goods and Services Tax Ruling GSTR 2000/34
Subject references: Goods and services tax GST property & construction GST sale of real property GST tax periods Non cash basis GST supplies & acquisitions Taxable supply