Private ruling: GST and attribution
Date of advice: 23 March 2016
Published: May 2016

Ruling: Q1: Does section 156-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) apply to payments received for the Development rights, Loan or Allotment sales under the Development Management Agreement (DMA) by Entity A from Entity B? | A1: No. | Q2: If the answer to question 1 is no, will the Commissioner of Taxation's Determination in Schedule 5 of the Goods and Services Tax Ruling GSTR 2000/29 Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25 apply ? | A2: No.

Relevant facts and circumstances: Entity A (You) is registered for GST. You, account for GST on a monthly non-cash basis. You own parcels of land in Australia (Land). You have entered into a Development Management Agreement (DMA) with Entity B. You have provided a copy of the DMA Under the DMA, Entity B has been granted the rights to develop the Land. In consideration of you granting Entity B the rights to develop the land, Entity B must pay you $X. Entity B must also make a loan (Loan) to Entity A. The Loan is to be repaid by you to Entity B out of the proceeds of sale from the sold allotments. You are also entitled to effectively retain X% of the (GST exclusive) proceeds (Landowner's Sale Proceeds) from the sale of the allotments, subject to adjustments. You have appointed Entity B as your agent in relation to the sale of the Allotments. In consideration of Entity B agreeing to undertake the development project on the land, you must pay a Development Fee to Entity B.

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 | A New Tax System (Goods and Services Tax) Act 1999 Division 29, and | A New Tax System (Goods and Services Tax) Act 1999 Division 156.

Reasons for decision: Summary: Goods and Services Tax Ruling GSTR 2000/35 Goods and services tax: Division 156 - supplies and acquisitions made on a progressive or periodic basis (GSTR 2000/35) explains the application of Division 156. Under the basic attribution rules in Division 29 if you do not account for GST on a cash basis you are required to attribute all the GST payable on a taxable supply to the earlier of the tax period in which: • you receive any of the consideration for the supply, or • you issue an invoice for the supply. However, Division 156 alters the application of the basic attribution rules where the supply or acquisition and the consideration occur periodically or progressively. Paragraphs 25 and 26 of GSTR 2000/35 explain that a supply for a period will be one which is made on a continuous basis until the stipulated end point occurs, or the period expires, however a supply will not be for a period merely because there is a stipulated completion date. Paragraph 27 of GSTR 2000/35 explains that a supply is made on a progressive basis when the contract or agreement provides for stages of the supply during the course of the supply. A supply may also be a progressive supply where services are to be supplied on an ongoing basis. The Development Management Agreement (DMA) outlines the terms and conditions agreed between you and Entity B in relation to the project to develop the Land. | Detailed Reasoning - Development Right and Loan: The DMA provides that you appoint Entity B to undertake the project. The definitions and interpretations to the DMA provide that the project means the development, marketing and sale of the Land. Entity B will pay you $X (GST inclusive) as consideration for entering into the agreement. Entity B will also loan you $X for which you must make repayments, each time an Allotment, is sold of X% of the Gross Proceeds until the Loan is repaid. In entering into the Agreement, you granted Entity B the right to undertake the project. The right was granted by you to Entity B at the time of entering into the DMA and you made a single taxable supply of the right to develop the Land at this time. This supply is not made on a continuous or progressive basis and is not a periodic or progressive supply to which Division 156 would apply. The supply of the right to undertake the development by you to Entity B for $X meets all the requirements of a taxable supply under section 9-5. You, account for GST on a non-cash basis. Therefore, the GST is attributable in the earlier of the tax period in which you receive any of the consideration for the supply, or you issue an invoice for the supply, pursuant to section 29-5. The DMA provides that you will receive a $X loan from Entity B, $X after entering into the DMA and the balance after development approval has been obtained at the time of entering into the DMA. Loan repayments are made from you to Entity B, each time Entity B sells an Allotment on your behalf. The loan repayment is equivalent to X% of the Gross Proceeds for each Allotment until the Loan is repaid. No tax invoice will be issued for the loan repayment. The loan is not a supply pursuant to section 9-10(4). | Detailed Reasoning - Sales Proceeds: The supply of Allotments by you (on your behalf by Entity B) meets all the requirements of a taxable supply under section 9-5. You have appointed Entity B to sell Allotments on your behalf. You receive X% of the (GST exclusive) proceeds (Landowner's Sale Proceeds) from each sale of an Allotment. Each sale of an Allotment is a single taxable supply. This supply is not made on a continuous or progressive basis and is not a periodic or progressive supply to which Division 156 would apply. The GST is attributable in the earlier of the tax period in which you receive any of the consideration for the supply, or you issue an invoice for the supply, pursuant to section 29-5. | Detailed Reasoning - Question 2: Under section 29-25 the Commissioner may determine in writing the tax periods to which GST payable is attributable in particular circumstances, where he is satisfied that the basic attribution rules apply inappropriately. Such a determination overrides the basic attribution rules but only to the extent provided for in the determination. The Commissioner has made a written determination under subsection 29-25(1) applying paragraph 29-25(2)(e). The relevant determination is A New Tax System (Goods and Services Tax) (Particular Attribution Rules Where Total Consideration Not Known) Determination (No 1) 2000 (the Commissioner's Determination). See Schedule 5 of Goods and Services Tax Ruling GSTR 2000/29 Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25 . The Commissioner's Determination applies where: (a) you make a taxable supply (b) you do not know the total consideration for the supply when any consideration is received for the supply or an invoice is issued relating to the supply, and (c) the ascertainment of the total consideration depends on a future event that is not entirely within your control; and either (d) an invoice is issued relating to the supply, or (e) any consideration is received for the supply. | Detailed Reasoning - Development Right: The Determination is not applicable. The total consideration for the supply of the development right is known ($X). GST is attributable in the earlier of the tax period in which you receive any of the consideration for the supply, or you issue an invoice for the supply, pursuant to section 29-5. | Detailed Reasoning - Loan: The Determination is not applicable. You are not making a taxable supply in accepting the loan from Entity B. | Detailed Reasoning - Sales Proceeds: The Determination is not applicable. Each sale of an Allotment is a single taxable supply. The total consideration for the supply of an Allotment is known. The making of a loan repayment or the payment of a Development Fee from the proceeds of the sale of an Allotment does not constitute not knowing the total consideration for the supply. GST is attributable in the earlier of the tax period in which you receive any of the consideration for the supply, or you issue an invoice for the supply, pursuant to section 29-5.

Reasons for decision: In this reasoning, please note: | • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) | • all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au