Private ruling: GST and Compensation payments
Date of advice: 18 January 2016
Published: March 2016
Ruling period: Not applicable
Date scheme commenced: Not applicable

Ruling: Q1: Are you, as a landowner making a taxable supply under a Compensation Agreement with the X in relation to a X lease or a X claim? | A1: Yes, you are making a taxable supply as a landowner in relation to a X lease or a X claim.

Relevant facts and circumstances: • You (landowners) carry on an enterprise of leasing land for X and registered for goods and services tax (GST). • Landowners understand that when an X applies for a X lease or claim to the relevant Department, they are required to have a compensation agreement with the landowners. • Landowners grant the X the right to access the property in order to carry on the X activities. • The relevant Department has advised the landowners and the X that there is no GST on compensation agreements. • Under the compensation agreement the landowners are by virtue of the provisions of the Act entitled to compensation with respect to: • deprivation of possession of the surface of the land of the owner; • diminution of the value of the land of the owner or any improvements thereon; • diminution of the use made or which may be made of the land of the owner or any improvements thereon; • severance of any part of the land from other parts thereof or from other land of the owner; • any surface rights of access; • all loss or expense that arises;

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5. | A New Tax System (Goods and Services Tax) Act 1999 section 9-10.

Reasons for decision: Summary: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with Australia; and you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Section 9-10 of the GST Act refers to the meaning of supply and provides that a supply is any form of supply whatsoever. A supply includes any of these: (a) a supply of goods; (b) ……….. (c) a supply of services; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) …………….. (g) an entry into or lease from an obligation: (i) to do anything; or (ii) to refrain from an act; or (iii) to tolerate an act or situation. (h) any combination of any 2 or more of the matters referred to in (a) to (g). In this case, the landowners make a supply to the X of the right to enter into their land and carry out the X activities. Under paragraph 9-10(2)(e) of the GST Act, the grant of this right by the landowners to the X is a supply from the landowners allowing the X to enter their property for X activities. The payments made by the X to the landowners for the compensable effects have a direct nexus with the grant of this right. Therefore, the compensation payments made by the X to the landowners constitute the consideration for the supply made by the landowners. Accordingly, paragraph 9-5(a) of the GST Act is satisfied. | Detailed Reasoning - Taxable supply: It is necessary to consider whether the supply of right made by the landowners to use the land by the X satisfy all of the requirements of section 9-5 of the GST Act. As explained above, the X will make consideration for the supply made by the landowners; the supply of right to use the land is made in the course or furtherance of the enterprise of leasing land; the supply is connected with Australia and the landowners are registered for GST. The supply of right to enter the landowners' land and carry out the X activities is not a GST-free or an input taxed supply under any provision of the GST Act. Therefore, the supply of right by the landowners to the X satisfies all the requirement of a taxable supply under section 9-5 of the GST Act and subject to GST.

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