His Honour considered the interpretation of the expression "to be used predominantly for residential accommodation" in s 40-65(1) of the GST legislation. Broadly that section provides that supplies of real property are input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation. A similar issue arises under s 40-35(2)(a) in relation to supplies by way of lease, hire or licence. His Honour concluded that the expression requires a prediction of the use of the property and that the main factor to be considered in making that prediction is the subjective intention of the purchaser or lessee.
The ATO says that it is concerned that the approach outlined by his Honour may cause difficulties to vendors in particular cases as a result of the liability of the vendor being determined on the basis of the subjective intention of the purchaser which may not be known to the vendor. As a practical matter, the vendor may not be aware of a relevant change in the purchaser’s intention which may impact upon the vendor’s GST liability and contractual remedies may not always be effective for any misrepresentations that may be made.
The ATO says that it prefers the view that an objective approach is required to the interpretation of the phrase "to be used predominantly for residential accommodation". Accordingly, the ATO will continue to administer the provisions in accordance with the views in GSTR 2000/20 pending further judicial clarification, which it will endeavour to obtain if an opportunity arises in other litigation (the Commissioner was not a party in Toyama v Landmark).
For a copy of the ATO document, go here
For a copy of the Toyama v Landmark decision, go here