26 May 10 Assignment of newly constructed residential premises input taxed - Gloxinia
The Full Federal Court (Dowsett, Kenny and Middleton JJ) has dismissed the Commissioner's appeal from the decision of Emmett J, who held that the assignment of a leasehold of residential premises in a newly constructed apartment building was an input taxed supply within the meaning of the GST Act.
Although the residential premises were newly constructed, they were not "new residential premises" within the meaning of s 40-75(1) of the GST Act because they had previously been the subject of a long term lease, albeit briefly, granted by the owner of the freehold (Woollahra Municipal Council) to the taxpayer as developer.
Middleton J noted, at paras 90-92:
"It was not contended by the Commissioner that the grant of Strata Lot Leases [by the Council] was a sham or subject to any tax avoidance legislative provisions. The Court cannot ignore the legal effect of the grant of the Strata Lot Leases by the Council. Nothing in any of the cases referred to by the Commissioner, including Brady King v FCT  FCAFC 118; (2008) 168 FCR 558, dictates that the Court should ignore the legal effect of the transactions involved, particularly the grant of the Strata Lot Lease."
FCT v Gloxinia Investments (Trustee)  FCAFC 46 (Full Federal Court; Dowsett, Kenny and Middleton JJ; 24 May 2010).