Private ruling: GST - development leases
Date of advice: 8 May 2026
Published: 27 July 2026
Ruling period: <Date> to <date>
Date scheme commenced: <date>

Ruling: Q1: Will the supply of the Development Services undertaken by Entity A pursuant to the Contract of Sale, Specimen Holding Lease, Deed of Agreement and Estate Project Delivery Deed, (collectively the Project Documents) on the Land, be additional non-monetary consideration pursuant to section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the taxable supply of the Land by Entity B, under section 9-5 of the GST Act? | A1: Yes , to the extent that the Development Services to be undertaken by Entity A pursuant to the Project Documents are required to obtain the requisite Certificate of Practical Completion that is required for the grant of the Consequent Leases, those Development Services will constitute consideration for the supply of the Land by the Entity B pursuant to section 9-15. | Q2: If the answer to question 1 is 'Yes', will Entity B make a creditable acquisition pursuant to section 11-5 of the GST Act of the supply of the Development Services undertaken by Entity A pursuant to the Project Documents on the Land? | A2: Yes. | Q3: Is the proposed valuation methodology a fair and reasonable basis to value the non-monetary consideration provided by Entity A as identified under the above questions? | A3: Yes , the Commissioner considers that it is reasonable for the parties to value the non-monetary consideration provided by entity A, by determining the full costing of the Works on a 'cost plus margin' basis. Where the full costing of the works on a cost-plus margin basis is determined by a quantity surveyor, whether the suggested methodology is reasonable will depend on the approach taken by the quantity surveyor, the reasonableness of the margin chosen, and the instructions given to the quantity surveyor.

Relevant facts and circumstances: On <date>, Entity B entered into an arrangement with Entity A for the purchase and development of the Land as a staged development comprising of a mix of residential, commercial and industrial areas. This was done under a number of Contracts (collectively the Project Documents), copies of which were provided with the private ruling application. Entity B and Entity A entered into an arrangement to development of the Land under a short-term holding lease. Entity A is required to complete the Development Services on Land in stages and in accordance with the Project Documents and the conditions of the Holding Lease or risk forfeiting their entitlement to the holding lease and the right to apply for long term consequent leases. Development Services includes all the works as per clause <number> of the Contract of Sale and which are specified in Annexures <numbers> to the Deed of Agreement (being <clause number> Works and <clause number> Works, including preparatory works on certain Blocks to be retained by Entity B and the offsite works referred in < clause number>), and the offsite works described in Schedule <number> to the Estate Project Delivery Deed (Estate PDD), in order to be granted a Certificate of Completion for the relevant Stage. Upon the satisfactory completion of the Development Services in a stage on the Land, Entity A will surrender the holding lease over the Land in so far as it relates to that stage and will be issued consequent long-term crown leases over the newly subdivided land. The issue of the consequent long-term leases is conditional on the satisfactory completion of the Development Services in the prescribed manner and within the agreed timeframe. Entity A and Entity B are registered for GST. Entity A is dealing with Entity B at arm's length. The entities have agreed to value the Development Services by determining full costing of the services on a cost-plus margin basis.

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 section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 9-75 | A New Tax System (Goods and Services Tax) Act 1999 section 29-5 | A New Tax System (Goods and Services Tax) Act 1999 section 29-10 | A New Tax System (Goods and Services Tax) Act 1999 section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-10 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 149-15 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Detailed Reasoning - Detailed reasoning: Subsection 9-15(1) provides that consideration includes: (a) any payment, or any act or forbearance, in connection with a supply of anything; and (b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything. There are two elements to the definition of consideration, which are: the payment by one entity to another; and a nexus that must be established between the payment and a supply. Paragraph 12 of Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) explains that consideration is not limited to payments of money: 12. A 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form, such as: • providing goods; • granting a right or performing a service (an act); and • entering into an obligation, for example to refrain from selling a particular product (a forbearance). Paragraphs 50 and 51 of GSTR 2001/6 provide that there needs to be a connection between the supply and the payment for the supply to be made for consideration: 50. Section 9-15 further provides that a payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply. Thus, there must be a sufficient nexus between a particular payment and a particular supply for the payment to be consideration for that supply. 51. It follows that there are two elements to the definition of consideration. The first is the payment by one entity to another. The second element is the nexus that must be established between the payment and a supply. Paragraphs 71 and 72 of GSTR 2001/6 provide that the test of determining a sufficient nexus between the supply and the consideration is an objective one based on the true character of the transaction. | Detailed Reasoning - Supply of development services under development lease arrangements: Goods and Services Tax Ruling GSTR 2015/2 Goods and services tax: development lease arrangements with government agencies (GSTR 2015/2) explains the GST treatment of particular transactions arising in the context of development lease arrangements entered into between government agencies and private developers and outlines their particular features. [1] Sometimes in the <State> the Government releases land for sale to developers by granting a holding lease to the developer which is then followed by the grant of a X year long-term lease to the developer. The principles outlined in this Ruling may apply to these arrangements in the <State>. [2] Paragraphs 14 and 15 of GSTR 2015/2 discuss common features of development lease arrangements. Paragraph 22 describes the actions that are typical in a development lease arrangement including that: • the government agency grants a short-term lease to the developer to allow the developer to undertake development works on the land • the developer undertakes development works, on its own account and at its own risk, on land owned by the government agency • the government agency transfers the freehold interest in the land or grants a long-term lease of the land to the developer • the developer making one or more monetary payments to the government agency The facts of this case align with the scenario outlined in paragraphs 14-15 of GSTR 2015/2 for the following reasons: • Entity B, being the government agency, will grant Entity A a Holding Lease for the purpose of undertaking works on the Land, • Entity A is obliged to perform works under the arrangement on their own account and not as agent or builder for Entity B, • Entity A bears all the costs associated with the development of the Land as per clause <number> to the Deed of Agreement and clause <number> to the Estate PDD, • Entity A is required to undertake <clause number>. and <clause number> works in accordance with the terms of the Deed of Agreement and within the timeframes set out in the Holding Lease and Deed of Agreement or risk forfeiting the entitlement to the Holding Lease and right to apply for the Consequent Leases under the Deed of Agreement, • Entity B will progressively grant Entity A long-term leases over the Land, pursuant to the statutory objectives as set out in section <number> of the <Act>, as and when Entity A completes its relevant obligations under the Deed of Agreement (namely, the completion <clause number>, <clause number> works (including the preparatory works on certain Blocks to be retained by Entity B and the offsite works referred in <clause number>), and the offsite works described in Schedule <number> to the Estate Project Delivery Deed. Paragraphs 11 and 12 of GST 2015/2 discuss supplies made for consideration under a development lease arrangement: 11. Where the terms of the development lease arrangement make the supply of the land subject to or conditional on the developer completing specified development works, supply of the land by the government agency is consideration for the developer's supply of development services. The supply of development services by the developer is, in turn, consideration for the supply of land by the government agency. 12. Where the developer completes additional works on land retained by the government agency, the developer makes a supply of development services to the government agency. The supply of the land by the government agency is consideration for this supply of development services by the developer if: • the terms of the development lease arrangement make the government agency's supply of land subject to or conditional upon the developer completing the additional works, and • Divisions 81 and 82 do not apply. The supply of the land to the developer by the government agency is consideration for the developer's supply of development services if there is a sufficient nexus between supply of the development services and transfer of the land. Paragraph 35 explains further: 35. There is a sufficient nexus between the development services and the transfer of freehold or grant of a long-term lease if the development lease arrangement makes the supply of the land subject to or conditional on the developer completing specified development works. For example, the developer only becomes entitled to the freehold or long-term lease on completion of the development or a particular stage of the development. Pursuant to the above listed Project Documents, Entity A is required to prepare the Land primarily for residential development, with a portion of the site designated for mixed-use development comprising of residential and commercial uses and permitting a maximum <number> of dwellings in the Estate (<clause number> List of Leases). Upon the completion of the Development Services for a particular stage, Entity A may apply for the issue of Consequent Leases. The Developer will further develop the Land for which it holds a Consequent Lease in stages and will subsequently sell the completed residential units to third party purchasers. Part <number> of the Deed of Agreement makes the granting of the long-term Consequent Leases conditional upon <Entity A> satisfactorily completing the Works for the relevant Stage in the development of the Land. 'Works' is defined in the Deed of Agreement to mean: all the Works and activities which the Developer is or may be required to execute and engage in under the Deed and includes all design, variations, remedial work and temporary work as specified in Annexure A1.1 and Annexure A2 It is these Works - Development Services, that have the relevant nexus to the grant of the Consequent Leases by Entity B. The Development Services comprising of Annexure <clause number> and <clause number> Works to the Deed of Agreement (including preparatory works to be undertaken on the Blocks to be retained by Entity B and offsite works specified in <clause number>) and the offsite works described in Schedule <number> to the Estate PDD to be supplied by Entity A are therefore non-monetary consideration for the supply of the Consequent Leases of the Land by Entity B.. Works that are not explicitly included in the definition of 'Works' and that are not subject to the issue of the Certificate of Completion consequently do not form part of the Development Services that must be completed in order for the Consequent Leases to be granted to Entity A and will not be non-monetary consideration for the supply of the Consequent Leases of the Land by Entity B. We consider that Division 81 and 82 do not apply to Entity B's grant of the Consequent Leases to Entity A. | Detailed Reasoning - Conclusion: There is sufficient nexus between the completion Annexure <clause number> and <clause number> Works to the Deed of Agreement (including preparatory works to be undertaken on the Blocks to be retained by Entity B and offsite works specified in clause <number>) and offsite works described in Schedule <number> to the Estate PDD and the supply of the Land. The terms of the arrangement make the supply of the Land subject to the completion of these works. Therefore, as per paragraph 11 of GSTR 2015/2, the supply of Development Services by Entity A in the form of Annexure <clause number> and <clause number> Works to the Deed of Agreement (including preparatory works to be undertaken on the Blocks to be retained by Entity B and offsite works specified in <clause number>) and the offsite works described in Schedule <number> to the Estate PDD, is additional non-monetary consideration for Entity B's supply of the Land pursuant to section 9-15. | Detailed Reasoning - Question 2: If the answer to question 1 is 'Yes', will Entity B make a creditable acquisition pursuant to section 11-5 of the GST Act of the supply of the Development Services undertaken by Entity A pursuant to the Project Documents on the Land? | Detailed Reasoning - Detailed reasoning: Section 11-5 provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose (b) the supply of the thing to you is a taxable supply (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered or required to be registered. Supply of the thing to you is a taxable supply and you provide (or are liable to provide) consideration Pursuant to section 9-5, a taxable supply is made where the supply is made for consideration, the supply is in the course or furtherance of an enterprise that is carried on, the supply is connected with the indirect tax zone (Australia) and the supplier is registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The meaning of 'supply' is given in section 9-10. A supply is any form of supply whatsoever and includes: • a supply of goods • a supply of services • an entry into an obligation to do anything. An entity will make a supply whenever that entity (the supplier) provides something of value to another entity (the recipient). [3] Entity B has granted Entity A a short-term holding lease to allow Entity A to undertake the Development Services on the Land. These works are required to be completed in order to obtain the Certificate of Practical completion and subsequently be granted the consequent leases by the Entity B. In completing the Development Services, entity A is providing something of value to the Entity B and is making a supply to the Entity B. Entity A is making supplies to Entity B in Australia, in the course or furtherance of their property development enterprise. Entity A is registered for GST, and the supply of Development Services are neither GST-free nor input taxed. Part Number> of the Deed of Agreement makes the granting of long-term Consequent Leases conditional on Entity A satisfactorily completing the Works for the relevant Stage in the development of the Land in order to be granted the Consequent Leases by Entity B. Therefore, the granting of the Consequent Leases by the Entity B is non-monetary consideration for the supply of the Development Services by entity A and paragraph 15-5(c) is satisfied. We consider that Division 81 and 82 do not apply to Entity B's grant of the Consequent Leases to Entity A. The supply of the Development Services to Entity B meets all the requirements of section 9-5 and therefore the supply of the Development Services to Entity B is a taxable supply and paragraph 11-59(b) is satisfied | Detailed Reasoning - Creditable purpose: Entity B's acquisition of Development Services from Entity A needs to be acquired for a creditable purpose in order for paragraph 11-5(a) to be satisfied. Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise and the acquisitions do not relate to input taxed supplies or acquisitions of a private or domestic nature. An 'enterprise' is defined in subsection 9-20(1) to be an activity or series of activities done, among other things, by the Commonwealth, a State or a Territory, or by a body corporate, or corporation sole, established for a public purpose by or under a law of the Commonwealth, a State or a Territory. [4] Entity B is a Territory authority established under section <number> of the <Act>. Section <number> of the <Act> provides that the Entity B's objects include the delivery of suburban development. Accordingly, in advancing the objects described under section <number> of the <Act>, Entity B is carrying on an enterprise. When Entity B makes acquisitions of Development Services from Entity A, Entity B will acquire them in carrying on its enterprise. These acquisitions do not relate to input taxed supplies, nor are they of a private or domestic nature. These acquisitions are therefore for a creditable purpose within the meaning of paragraph 11-5(a). GST registration Entity B is registered for GST and so paragraph 11-5(d) is satisfied. | Detailed Reasoning - Conclusion: Entity B will acquire the Development Services for a creditable purpose, the Development Services are taxable supplies made to Entity B, Entity B have provided consideration for the supplies and is registered for GST. As the requirements of section 11-5 are met, Entity B's acquisition of the Development Services undertaken by Entity A pursuant the Project Documents, on the Land will be a creditable acquisition | Detailed Reasoning - Question 3: Is the proposed valuation methodology a fair and reasonable basis to value the non-monetary consideration provided by Entity A as identified under the above questions? | Detailed Reasoning - Answer: Yes, the Commissioner considers that it is reasonable for the parties to value the non-monetary consideration provided by entity A, by determining the full costing of the Works on a 'cost plus margin' basis as determined by a Quantity Surveyor. However, whether the suggested methodology is reasonable will depend on the approach taken by the quantity surveyor, the reasonableness of the margin chosen, and the instructions given to the quantity surveyor. | Detailed Reasoning - Detailed reasoning: Section 9-75 of the GST Act provides that the value of a taxable supply is 10/11th of the price. Price, where consideration is expressed as a non-monetary amount, is the GST inclusive market value of that consideration. GST inclusive market value means the market value of the consideration or thing, without any discount for any amount of GST or luxury car tax payable on the supply. The value of the non-monetary consideration is determined in accordance with the principles set out in Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non- monetary consideration. [5] Paragraph 138 to 144 of GSTR 2001/6 provides: 138. Where the consideration for a supply is non-monetary, the GST inclusive market value of that consideration is used to work out the price and value of the supply. In most circumstances where parties are dealing at arm's length, we are of the view that the goods, services or other things exchanged are of equal GST inclusive market value. 139. As the GST inclusive market value of consideration will be shown as the price on any tax invoice that the supplier issues, the onus for determining the GST inclusive market value of the consideration rests with the supplier. 140. In Spencer v Commonwealth of Australia (1907) 5 CLR 418, the High Court of Australia looked at valuation methods and recognised the concept of a 'willing buyer and willing seller'. Griffith CJ stated: ...the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring "What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?" 141. Market value is regarded as the price that would be negotiated at a specified time between a knowledgeable and willing but not anxious buyer and a knowledgeable and willing but not anxious seller acting at arm's length in an appropriate market. It is an objective test and not the subjective view of any one party. 142. Depending on the context or circumstances of a transaction, it may be necessary to value the consideration by reference to either a general market or a particular market. For example, a wholesaler who (in making a supply to a retailer) receives consideration in a non-monetary form, should value that consideration by reference to the price for which he/she would normally buy that product or service in a general market. If the wholesaler normally bought the product or service from a manufacturer, the trade market is the market in which it should be valued. If the wholesaler normally bought that product or service from a retail outlet, the retail market is the relevant market. 143. Problems can arise when there is no market or the value to the seller is different to that for the buyer. It does not matter whether there is only one buyer or seller or even if one or both are 'hypothetical'. Courts have determined that market value can be determined in these circumstances. 144. You may determine the GST inclusive market value of non-monetary consideration for a taxable supply by applying a method that produces a reasonable GST inclusive market value of the consideration. There will be situations where the methods used by parties differ according to their particular circumstances. Examples of reasonable methods include: • the market value of an identical good, service or thing; • the market value of a similar good, service or thing; • the market value of the supply; or • a professional appraisal. Paragraph 154 and 155 of GSTR 2001/6 provides: Professional appraisal 154. A professional appraisal directed at determining the market value of the consideration for your supply will be a reasonable method where it: • is done by a person who is recognised in the particular field in which the appraisal is being given as having the requisite skills and knowledge for the task; and • uses valuation methodologies that are consistent with professional guidelines. | Detailed Reasoning - Other reasonable methods: 155. Where you are making a taxable supply and you are dealing with another party at arm's length, you can use a reasonable valuation method as determined between you and the other party. Also, where both the supply and the consideration are difficult to value (for example, a forbearance may have no identifiable market), you can calculate a reasonable market value for the non-monetary consideration (for example, a 'cost plus margin' method). In relation to valuing non-monetary consideration for the supply of Crown Lease Land paragraph 27 of GSTD 2021/1 provides: 27. These associated site works are non-monetary consideration for the supply of the Crown lease land . The value of the non-monetary consideration is determined in accordance with the principles set out in GSTR 2001/6. In relation to development lease arrangements, paragraphs 69 and 70 of GSTR 2015/2 provide: 69. Where the parties to a development lease arrangement are dealing with each other at arm's length, the Commissioner considers that the things exchanged between the parties are of equal GST inclusive market value. Therefore, in the context of a development lease arrangement between a government agency and a developer, the parties can use a reasonable valuation method as agreed between them to determine the GST-inclusive market value of any non-monetary consideration for supplies arising in the context of a development lease arrangement. 70. For example, the full costing of the development works, undertaken by the developer as part of a competitive tender process, which takes into account the full cost of construction (including builder margins), provides a reasonable basis for determining the GST-inclusive market value of the supply of development services by the developer. It also provides a reasonable basis for calculating the price of the government agency's related supply of land (or grant of a call option). Under the Project Documents, Entity A agrees to pay both monetary consideration - being the purchase price of $<amount> (exclusive of GST), as well as undertake certain Development Services which have been determined at Question 1 to be non-monetary consideration for the supply of Entity B's supply of the Land. It is considered that Entity A is dealing with Entity B at arm's length and the goods, services or other things exchanged between them are of equal GST inclusive market value. Under these circumstances, the parties can use a reasonable valuation method as agreed between them to determine the GST inclusive market value of the non-monetary consideration of the Development Services. However, the valuation method selected by the parties to value the non-monetary consideration must nonetheless be fair and reasonable and produce a reasonable GST inclusive market value of the things exchanged. Clause <number> and <number> to the Contract of Sale set out the methodology to be used to determine the non-monetary consideration of the 'Buyer's Works. The parties propose to value the non-monetary consideration of the Development Services that have been determined above to be non-monetary consideration by calculating the full costing of the services on a cost-plus margin basis. Provided this proposed method by which Entity A determines the value of the Works meets the valuation requirements outlined in GSTR 2001/6 and GSTR 2015/2 and produces a reasonable GST inclusive value, it will be accepted by the Commissioner. Where the full costing of the works on a cost-plus margin basis is determined by a quantity surveyor, whether the suggested methodology is reasonable will depend on the approach taken by the quantity surveyor, the reasonableness of the margin chosen, and the instructions given to the quantity surveyor. [1] GSTR 2015/2 at paragraph 1 [2] GSTR 2015/2 at paragraph 6 [3] Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies at paragraph 71 [4] paragraph 9-20(1)(g) of the GST Act. [5] GSTD 2021/1 at paragraph 27.