Draft GST Ruling GSTR 2014/D5

The Commissioner has issued a draft ruling to explain the GST treatment of particular transactions arising in the context of development lease arrangements entered into between government agencies and private developers.

These arrangements typically have following features :

the private developer (developer) undertaking 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 supplying 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 transfer of the freehold or grant of a long-term lease when the development is completed. 

In particular, the draft ruling considers:

the relevant principles for identifying and characterising the various supplies that are made for consideration under development lease arrangement, including: – 

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 the land is a supply for consideration and 

– whether, in completing the works on land owned by the government agency, the developer makes a supply of development services to the government agency for consideration, and

– whether the sale of the freehold or grant of the long-term lease of the land by the government agency is supply for consideration, and whether any consideration the developer provides for supply of the land includes undertaking of the development works 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, ie 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 Div 29 of the GST Act, of the GST liabilities and input tax credit entitlements that may arise under development lease arrangements.

This news story is reprinted from CCH Tax Week

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FXStreet (Guatemala) - Jacqui Douglas, Senior Global Strategist, Rates and FX Research at TD Securities reminded that RBA Governor Glenn Stevens, made a keynote speech on ’The Economic Outlook’ in HK.

“He voiced an upbeat view on the global and domestic economies, comparing favourably with the dire global and financial market conditions prevailing two years ago when he last addressed the audience”.

“Overall, the speech read like a set of RBA Board meeting minutes, with a discussion of the global economy, including diverging global central bank monetary policy paths, followed by an upbeat assessment of domestic conditions”.

“The concluding remarks noted that the best course of action for monetary policy for Australia is that “a period of stability in interest rates could be expected”.

“Deputy Governor Philip Lowe made Opening Remarks on ‘Some Implications of the Internationalisation of the Renminbi’ in Sydney. Dep Gov Lowe said the process of China moving towards a flexible exchange rate regime, brings much promise, as it did when Australia made the same move. While there is no precedence of a country as large as China taking such measures, a change in Chinese Capital flows will have a definite impact on markets”.

“Lastly the RBA released its Half year financial market report , the RBA Financial Stability Review, reinforcing the Australian Banking and Finance Industry is well placed to deal with future crises. A new theme that did emerge was the need for institutions to be more vigilant on maintaining lending standards. We read this as a warning from the RBA to borrowers and lenders not to over commit should interest rates move higher and house prices stop rising”.

This news story is reprinted from www.fxstreet.com

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The ATO has released a decision impact statement on the Full Federal Court decision in ATS Pacific Pty Ltd v FC of T 2014 ATC ¶20-449.

In that case, the Full Federal Court held that the supplies made by an Australian tour operator to non-resident travel agents (NR travel agents) were not GST-free. In so doing, the court dismissed the taxpayer’s appeal and allowed the Commissioner’s cross-appeal from the first instance decision of Bennett J reported at 2013 ATC ¶20-383.

ATO view of decision

Although the decision relates to specific facts, the Commissioner considers that the decision applies to all inbound tour operators (ITOs) which: ● transact as principal (and not as an agent of the NR travel agent), and are engaged by NR travel agents to enter into contracts with Australian providers for the provision of components of tour packages to NR tourists.

Under the court’s reasoning, the supplies made by these ITOs to their NR travel agent clients are properly characterised as supplies of promises to ensure components of tour packages are provided. The supplies are wholly taxable.

This news story is reprinted from CCH Tax week

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