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The ATO has published a Decision Impact Statement in relation to the recent decision of the High Court in FCT v Reliance Carpet Co Pty Ltd [2008] HCA 22. The case concerned the question of whether GST is payable on the forfeiture of a security deposit. The High Court held that a vendor of land makes a supply to a purchaser when a contract for sale is entered into and that the deposit paid by the purchaser is consideration for that supply where the deposit is forfeited. This confirms the Commissioner's view.

The Decision Impact Statement also considers the situation where a contemplated supply would have been GST-free or input taxed. This was not the situation in Reliance Carpet. The Statement states that the Commissioner considers that ss 9-30(1)(b) and 9-30(2)(b) of the GST Act would be applicable in a case where a security deposit is forfeited in relation to a contract where the contemplated supply would have been GST-free or input taxed. Broadly those provisions state that a supply consisting of a right to receive another supply that would be GST-free or input taxed is also GST-free or input taxed, as the case requires. (The Statement also says that this paragraph is a public indirect tax ruling for the purposes of s 105-60 of the Taxation Administration Act 1953 (TAA) in relation to the application of ss 9-30(1)(b) and 9-30(2)(b) to cases of forfeited security deposits.

For a copy of the Decision Impact Statement, go here

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