For example, if at settlement a vendor receives a payment of $500.00 as an adjustment of rates and taxes paid on the property, GST will be worked out on the sale price plus $500.00.
Where rates are paid by a purchaser after settlement and the rates cover a period that the vendor owned the property, there is an adjustment payable by the vendor to the purchaser. In this situation, the adjustment reduces the price on which GST is calculated.
This determination does not affect sales where no GST is payable, for example sales of residential properties and sales of going concerns.
The determination does affect many sales of commercial properties and sales of land by developers, including sales where the margin scheme is applied.
There is a High Court case on somewhat different facts which decided that a settlement adjustment for rates paid in advance is not consideration for a property. There are also two recently decided Federal Court cases which reached conclusions opposite to each other. Again, the facts of these cases were somewhat different. Both cases are under appeal.
