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13 Jun 06 No review opportunity under lease - D B Rreef

The Full Federal Court (Ryan, Heerey and Edmonds JJ) has dismissed an appeal by the Commissioner against the decision of Sackville J, who held that the taxpayer was not obliged to pay GST in respect of rent received under a lease entered into prior to 8 July 1999 (the day on which the GST Act received Royal Assent), notwithstanding the existence of a "rent review process" upon the lessee's renewal of the lease by exercise of an option after 1 July 2000 (when GST first applied). Specifically, the Court held that s 13(5)(b) of the GST Transition Act did not apply to impose GST as there was no opportunity for "a general review, renegotiation or alteration of the consideration". Under the terms of the lease, only the rent payable for the premises (ignoring the fitout provided by the taxpayer) could be reviewed, which the Court held was only consideration for part of the supply, and not the whole of the supply which necessarily included the fitout: FCT v DB Rreef Funds Management Limited [2006] FCAFC 89 (Full Federal Court; Ryan, Heerey and Edmonds JJ; 8 June 2006).

For a copy of the decision, go here

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