Yesterday the Commissioner issued draft GST Ruling GSTR 2014/D5 ‘Goods and Services tax: development lease arrangements with government entities’.
The draft ruling outlines the Commissioner’s views on the GST treatment of arrangements between government entities and private developers that typically have the following features:
- the private developer undertakes a development on land owned by a government agency in accordance with the terms of a written agreement between the developer and the government agency; and
- the government agency supplies the land by way of freehold or grant of a long term lease to the developer, subject to the developer undertaking the development in accordance with the terms of the written agreement – that is, the developer becomes entitled to a transfer of the freehold or grant of a long term lease when the development is completed.
The ruling is comprehensive and considers the following matters:
- the relevant principles for identifying and characterising the various supplies that are made for consideration under a development lease arrangement;
- whether the grant of a short-term lease or licence (development lease) by the government agency to allow the developer to undertake the development on land is a supply for consideration;
- whether, in completing the words on land owned by the government agency, the developer makes a supply of development services to the government agency for consideration;
- whether the sale of the freehold or grant of the long-term lease of land by the government agency is a supply for consideration, and whether any consideration the developer provides for supply of the land includes undertaking of the development words on land owned by the government agency;
- the extent to which the consideration for particular supplies made under a development lease arrangement includes consideration that is not expressed as an amount of money, that is, non-monetary consideration;
- how the value of any non-monetary consideration provided for supplies made in the context of a development lease arrangement may be determined; and
- the attribution, under Division 29, of the GST liabilities and input tax credit entitlements that may arise under development arrangements.
My analysis of the draft ruling can be accessed here.
Comments on the draft ruling are due by 9 January 2015.