High Court GST case leaves industry in suspense
The High Court of Australia’s decision to uphold the Australian Taxation Office’s (ATO’s) right to charge goods and services tax (GST) on deposits forfeited on property deals fails to clarify how the issue will be treated in different circumstances and industries, according to Deloitte tax partner Andrew Nutman.
In the landmark case of Reliance Carpets v Commissioner of Taxation, Reliance Carpets argued it should not pay GST on the $300,000 it received as part of a 2002 deal to sell a $2.98 million commercial property in Melbourne that fell through. Yesterday, the court quashed a Federal Court ruling in Reliance’s favour.
While tax commissioner Michael D’Ascenzo welcomed the decision, Nutman argued that it “ultimately failed to address the treatment of deposits for GST purposes”.
“[B]usinesses involved in identical land and property transactions will need to ensure they have accounted for GST on deposits. But for businesses supplying land in differing circumstances and businesses in other industries that take deposits, particularly travel, tourism and major retail goods industries, this decision unfortunately does not provide certainty as to the correct GST treatment of forfeited deposits.
“Clearly, this is an issue that will ultimately need to be further clarified in the courts.”
Before the judgement was handed down, Nutman said that if the ATO lost, it could be forced to repay up to $1 billion in forfeited deposits.
Recommended for you
Multiple industry organisations have shared their thoughts on AFCA’s proposed rules amendment, supporting the idea of firms being named publicly when they fail to comply with determinations.
Channel Capital has appointed a head of investment oversight who joins from 14 years at asset consulting firm JANA Investment Advisers.
Licensee Centrepoint Alliance has completed the acquisition of Brighter Super’s annual review service advice book, via Financial Advice Matters.
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
