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The ATO has issued a Decision Impact Statement in relation to the Full Federal Court decision in Brady King Pty Ltd v FCT [2008] FCAFC 118. The case concerned the application of the GST margin scheme to sales of stratum units following the acquisition of an office building and its conversion into stratum units, and in particular whether the units were held or acquired before 1 July 2000. Before the Full Federal Court, both parties argued the trial judge was wrong to conclude that there had to be strict identity in juridical terms between what the taxpayer acquired and what it supplied. The Full Court agreed. Therefore it did not matter that the stratum units did not exist at the valuation date. The Full Federal Court also held that it did not matter that although the contract to purchase the property was entered into prior to 1 July 2000, settlement of the contract did not take place until after 1 July 2000. The Full Court remitted the matter to the trial judge to determine the margin for the supply of the units having declared that the margin is to be calculated under s 75-10(3) of the GST Act. This was necessary because the trial judge did not address the issue of whether the taxpayer's valuations complied with the Commissioner's determination "A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No 2) 2000" (MSV 2).

The Commissioner will not apply for special leave to appeal to the High Court against the decision of the Full Court. However, the ATO will continue to submit that the valuation does not comply with MSV 2 and will update the Decision Impact Statement when the decision of the trial judge in relation to that issue is released.

For a copy of the Decision Impact Statement, go here

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