Private ruling: Goods and Services Tax (GST) & compensation for surrender of rights and interests etc.
Published: February 2015

Ruling: Q1: Do the Parties make a taxable supply to the State, when entering into an Agreement under which they agree to surrender any Rights and Interests they hold together with other undertakings? | A1: No | Q2: Does the State make a taxable supply when it transferred land, or where it provides money or other things, as compensation to the Parties under the agreement? | A2: No

Relevant facts and circumstances: Under the terms of the agreement, the Parties undertaking the following obligations: • agreeing and consenting to the validating of all invalid acts (if any); • agreeing and consenting to the surrender of any rights and interests they may hold; and • preparing, signing and filing consent orders in the Federal Court. The State agrees to provide compensation to the Parties for performing these obligations as well as for any past impairment of their rights and interests.

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

Reasons for decision: Summary: The Parties will not make any supplies under the agreement for consideration and will therefore not make any taxable supplies under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The validation of any invalid acts as well as the surrender of any rights and interests occurs by operation of a law under a statute. The actions undertaken by the Parties with respect to preparing, signing and filing consent orders in the Federal Court does not result in the parties making a discontinuance supply as considered in paragraph 69 of Goods and Services Tax Ruling GSTR 2001/4. The Parties have not made a supply in relation to any impairment of their rights and interests. | Detailed Reasoning - Question 2:: As considered under question 1, the Parties will not make any supplies to the State for compensation to be provided by the State. Accordingly, the Parties will not provide any consideration for supplies made by the State which comprise the compensation to be provided. As the supplies made by the State are not made for consideration, the State will not make any taxable supplies under section 9-5 of the GST Act when it provides the compensation pursuant to the agreement.