In GOL-HUT Pty Ltd as trustee for the Helensvale Unit Trust and Commissioner of Taxation [2013] AATA 199 the Tribunal affirmed the decision of the Commissioner that the applicant, who had deregistered for GST, was not entitled to a decreasing adjustment for change of use under Division 129 when it sold a retirement village that had been used to make input taxed supplies.

The facts of the case are unusual.

• The applicant had acquired land in June 2000 on which a retirement village was constructed. The retirement village commenced operation in 2003 and in 2006 the trustee sold the village for $26,276,000. At the time of the sale, the independent living units in the village would have been classified as new residential premises.
• The trustee (who was registered for GST from 1 July 2000) did not claim any input tax credits for the costs relating to the construction and operation of the village – apparently because the trust was making input taxed supplies. The trust then de-registered for GST in 2006 and did not account for GST on the supply of the village – the village was simply sold without GST applying.
• In 2011 the trustee notified the Commissioner of a claimed entitlement to a “decreasing adjustment” of $2,074,179 and a request for a private ruling was lodged. The claim was essentially that the trustee was entitled to a decreasing adjustment because of the change of use in the village (ie, it was sold as a taxable supply, rather than the input taxed supply of the lease of residential premises). The ruling was not granted and the applicant objected to the ruling and sought review of the objection decision before the Tribunal.

The claim of the applicant appears to have been that because of the change in use of the retirement village, the applicant was entitled to a decreasing adjustment under Division 129 to reflect the fact that it was entitled to claim input tax credits for the acquisitions relating to the construction of the village. As observed by the Tribunal, such an adjustment is ordinarily made in a subsequent tax period, rather than by a revision of the original BAS.

The issue before the Tribunal was whether the applicant had further tax periods (and therefore adjustment periods) applying to it after it cancelled its GST registration (It should be noted that it was not contended that the applicant was at any time after cancellation, required to be registered for GST). The applicant contended that the effect of Division 138 (which is about cessation of registration), in particular ss 138-17(2) and (3), give continued operation to Division 129 after cancellation. The Commissioner contended that Division 129 could not operate unless there was a tax period – and post-cancellation there was no tax period and hence, no adjustment period.

The Tribunal did not accept the applicant’s argument. The Tribunal found that Division 138 did not have a stand-alone effect. Further, the Tribunal observed that such an operation would be contrary to the scheme of the GST Act and also inconsistent with the Explanatory Memorandum introducing s 138-17. The Tribunal concluded that Division 129 could not have any application to an entity that was neither registered nor required to be registered – the division cannot operate to create a tax period independent of the operation of the Act.