In a recent Decision Impact Statement, the ATO has suggested
that significant GST liabilities may arise for certain types of
infrastructure/PPP projects. These GST liabilities need to be
carefully managed by the parties, including through the use of
private GST rulings.
GST is payable on both monetary payments, as well as non-monetary
consideration (ie a barter transaction). Where there is
non-monetary consideration, the market value of both sides of a
transaction needs to be determined and may be subject to GST on
that value. In infrastructure/PPP projects where the
government grants a concession to the project entity in return for
that entity building and operating a facility, a question arises as
to whether these 'in-kind' obligations of the parties
constitute non-monetary consideration for GST purposes. An
example of such an arrangement is a state government granting a 30
year concession over a tollway to a consortium in return for the
consortium building and operating the tollway.
Given infrastructure/PPP projects are often worth upwards of
hundreds of millions of dollars, the potential GST liabilities
involved can be significant. While the GST can usually be
claimed back by the parties, the parties nevertheless need to
consider valuation issues, timing of GST liabilities, cash flow
issues and managing GST administration. Further, if the
parties fail to properly account for GST, they can be subject to
penalties and interest.
In 2008, the ATO issued a public GST ruling on development lease
arrangements. Development leases are generally joint ventures
between local councils/governments and property developers for
constructing residential developments and are structured in a
similar manner to many infrastructure/PPP projects. That
ruling adopted the position that development leases did not involve
non-monetary consideration. Hence, many tax advisers and
taxpayers considered that similarly structured infrastructure/PPP
projects should not involve any non-monetary consideration and have
not paid GST in respect of the arrangement.
As a result of the Full Federal Court decision
in Commissioner of Taxation v Gloxinia Investments
(Trustee) FCAFC 46 (Gloxinia),
concerning the GST treatment of development leases, the ATO has now
withdrawn its public GST ruling on development leases.
Further, its Decision Impact Statement on the Gloxinia decision
states that development lease arrangements do involve non-monetary
consideration and also implies that the value of the consideration
is likely to be significant.
The Gloxinia decision and the withdrawal of the public ruling on
development lease arrangements create significant uncertainty
regarding the GST treatment of similar infrastructure projects and
make it likely that governments and participants in
infrastructure/PPP projects will want to treat such arrangements as
being subject to GST or at least seek a private GST ruling on the
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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