Private ruling: GST refund claims
Date of advice: 30 November 2018
Published: January 2021

Ruling: Q1: Will each payment of a rebate give rise to a decreasing adjustment in respect of your sale of land to the lot purchaser? | A1: No, in respect of rebates paid to the original lot purchaser; however, yes in respect of rebates paid to a subsequent lot purchaser. Any such decreasing adjustments would arise under section 134-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) (decreasing adjustments for payments made to third parties) and not under Division 19 of the GST Act (decreasing adjustments arising from adjustment events). | Q2: If each third party payment of a rebate to a subsequent lot purchaser gives rise to a decreasing adjustment, will the Commissioner waive the requirement for you to hold a third party adjustment note under subsection 134-20(2) of the GST Act? | A2: No. | Q3: Where you have decreasing adjustments for the payment of rebates to subsequent lot purchasers, are the decreasing adjustments attributable to the tax periods in which the rebates are paid? | A3: No, as a third party adjustment note must be held in order to attribute a third party payment decreasing adjustment and no third party adjustment note was held at the relevant time. | Q4: Will section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)or Division 142 of the GST Act apply to prevent you from claiming refunds in respect of rebates paid to subsequent lot purchasers? | A4: No, however a third party adjustment note must be held in order to attribute a decreasing adjustment in relation to the payment of rebates to a subsequent lot purchaser.

Relevant facts and circumstances: • You are registered for GST and account for GST on a non-cash (accruals) basis. • You notified the ATO of GST refund entitlements which we acknowledged and confirmed had been made within the appropriate time. • Your ruling request concerns land owned by you that is being developed by another entity. • Contracts for the sale of land are entered into between you and the lot purchaser. You have treated the sales as taxable supplies and you have reported the GST in your Business Activity Statements. • You do not play any active role in undertaking the development and are not entitled to receive any of the gross proceeds other than a set amount per lot. • The purchaser of a lot enters into a deed as a condition of the contract for the sale of land. • The deed requires the lot purchaser to have, within a stipulated period of time, commenced building a house and to meet certain other requirements, such as landscaping, etc. • The deed also contains rebates clauses. The rebates clauses provide that another entity will pay the rebates if the lot purchaser meets the various conditions of entitlement and their claim is made within a stipulated period of time. The rebates may also be available to a subsequent lot purchaser. • In practice, the rebate entitlement conditions relating to house design and landscaping requirements are strictly enforced. The rebate entitlement conditions relating to timeframes are less strictly enforced. • You advised that neither you nor the other entity have issued or currently hold adjustment notes/third party adjustment notes or other documents that together would meet the information requirements of an adjustment note/third party adjustment note in relation to the rebates paid to lot purchasers/subsequent lot purchasers.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-15 | Subparagraph 9-10(2)(g) | Division 19-A | Section 19-10(1) | Section 19-5 | Section 19-40 | Section 19-55 | Subsection 29-20(1) | Subsection 29-20(3) | Section 29-75 | Section 29-80 | Section 75-30 | Section 195-1 | Division 134 | Section134-15 | Section 134-20 | Division 142 | Subsection 142-5(1) | Subsection 142-5(2) | Taxation Administration Act 1953 (TAA) Section 105-65 of Schedule 1

Reasons for decision: Detailed Reasoning - Reasons: Although we do not consider the payment of rebates to a lot purchaser to be consideration for a separate supply(s) made by the lot purchaser, the payment of rebates to an original lot purchaser will not result in a decreasing adjustment(s) to you under Division 19 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). That is, the payment of rebates to an original lot purchaser will not result in a reduction to the sale price of the lot sold by you to the original lot purchaser. The reason for this is that you were not the entity liable to the original lot purchaser for the rebates. However, the payment of rebates to a subsequent lot purchaser (i.e. a lot purchaser that has purchased a lot from an original lot purchaser to whom you had sold that lot) will result in a third party payment decreasing adjustment to you under section 134-5 of the GST Act (decreasing adjustments for payments made to third parties). | Detailed Reasoning - Question 2: If each third party payment of a rebate to a subsequent lot purchaser gives rise to a decreasing adjustment, will the Commissioner waive the requirement for you to hold a third party adjustment note under subsection 134-20(2) of the GST Act? | Detailed Reasoning - Reasons: The Commissioner will not waive the requirement for you (or the other entity, if relevant) to hold a third party adjustment note. A decreasing adjustment in relation to a third party payment is not attributable until the first tax period for which you give to the Commissioner a GST return at a time when you hold the relevant third party adjustment note, unless one of the exceptions applies. None of the exceptions apply in your case. | Detailed Reasoning - Question 3: Where you have decreasing adjustments for the payment of rebates to subsequent lot purchasers, are the decreasing adjustments attributable to the tax periods in which the rebates are paid? | Detailed Reasoning - Reasons: The decreasing adjustments for the payment of rebates to subsequent lot purchasers generally should have been able to be attributed to the tax periods in which the rebates were paid, as you should have been aware of the third party payment decreasing adjustments by then. However, as neither you (nor the other entity, if applicable) held third party adjustment notes at the time, the decreasing adjustments are not attributable until the first tax period for which you give to the Commissioner a GST return at a time when you (or the other entity, if applicable) hold the relevant third party adjustment note. | Detailed Reasoning - Question 4: Will section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)or Division 142 of the GST Act apply to prevent you from claiming refunds in respect of rebates paid to subsequent lot purchasers? | Detailed Reasoning - Reasons: Neither section 105-65 of Schedule 1 to the TAA nor Division 142 of the GST Act will apply to prevent you from claiming GST refunds in respect of rebates paid to subsequent lot purchasers. This is because neither section is applicable in your particular circumstances. However, a third party adjustment note must first be issued and held in order to attribute any third party payment decreasing adjustment in relation to rebates paid to a subsequent lot purchaser.