Issue #12
*** Breaking News ***
Brady King Appeal – Full Federal Court decides GST issue in favour of developer
This morning the Full Federal Court handed down its decision in Brady King Pty Ltd v FCT. The decision was an appeal from Middleton J’s decision (discussed in The Assessment – Issue 6 (Mar 2008)).
The Full Court allowed the appeal.
In broad terms, it held that a developer was entitled to calculate GST on sales of strata title units under the margin scheme using the value at 1 July 2000, even though the developer only had a contractual interest at 1 July 2000 in the parcel of land that was subsequently developed and subdivided by a strata title plan. (At the trial, the Commissioner had contended that Brady King Pty Ltd should apply the margin scheme based on the contract price of the land.)
More particularly, the case concerned the application of s 75-10(3) of the GST Act. The Court held that item (1) or item (3) of the table in this subsection applied. It was sufficient that prior to 1 July 2000 the developer had entered into a contract to purchase land which, after that date, was developed and subdivided into strata title units. The subsection was not predicated on the developer having completed the purchase of the land prior to 1 July 2000.
The trial judge based his decision in favour of the Commissioner on the ground that a contractual interest was insufficient. This ground implicitly raised a more fundamental question of whether the margin scheme was available to the developer. As a result, the appeal decision is to be welcomed.
The Full Court has remitted the matter back to the trial judge to determine the margin on which GST is payable.
This edition of ‘The Assessment‘ was prepared by Andrew Orange. If you have any comments in regards to the contents of this edition please feel free to pass them on to Andrew at andrewo@webbmartinconsulting.com.au .
