Private ruling: GST and supply of nomination rights relating to an option to purchase property
Date of advice: 4 December 2015
Published: February 2016

Ruling: Q1: Are you making an input taxed supply when you sell the nomination rights under an option agreement to purchase residential property? | A1: Yes, you are making an input taxed supply pursuant to paragraph 9-30(2)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you make a supply of a right to receive a supply that would be input taxed (in this case, residential premises). | Q2: Are you entitled to claim an input tax credit in regard to acquisitions incurred to procure property development consent? | A2: No. Your acquisitions related to either an input taxed supply of the right to receive a supply that would be input taxed (nomination right) or an input taxed supply of residential premises pursuant to section 40-35 of the GST Act. As such, your acquisitions have not been made for a creditable purpose in accordance with paragraph 11-15(2)(a) of the GST Act. Therefore you are not entitled to an input tax credit.

Relevant facts and circumstances: You are registered for GST and carry on an enterprise of leasing property. You entered into an agreement (Option Deed) granting you, or a nominee, an option to purchase a specified property (the Property). The Property is classified as residential premises for GST purposes. Following the exchange of the Option Deed, you procured consent to develop a number of apartments. Subsequently, you entered into a Deed of Sale of Nomination Rights (SoNR) with a third party whereby you agree to nominate the third party as your nominee under the Option Deed. The SoNR also provided that you will assign all of your rights, title and interest in and to all drawings, plans, consultant reports and instruments forming part of the Development Application. Consideration for this assignment has been accounted for in the price under the SoNR. Development consent has been granted. In procuring the development consent, you acquired goods and services including consultant's fees and statutory fees. It was not your intention to develop the property. It was your intention to either sell the option at a profit or acquire the property and rent the existing residential premises.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-30(2)(b) | Paragraph 11-15(2)(a) | Section 40-35.