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On 21 April 2011, the ATO issued a Decision Impact Statement in relation to the Full Federal Court decisioin in FCT v Gloxinia Investments Ltd atf Gloxinia Unit Trust [2010] FCAFC 46; 2010 ATC 20-182; 75 ATR 806.

The case was about the GST treatment of the sale of strata-titled home units:

  • constructed by a developer on its own account;
  • on lands already held by the developer by virtue of an existing long-term lease granted to the developer by a local Council; and
  • whereby the developer's existing long-term leasehold interest in the land, upon completion of construction of the home units, will be converted into individual 99 year strata lot leases.

The majority of the Full Federal Court (Kenny and Middleton J) held that the home units, when sold by Gloxinia, had previously been the subject of a long term lease and were no longer new residential premises pursuant to s 40-75(1)(a) of the GST Act. The Court concluded that, pursuant to s 40-65 of the GST Act, the sale of the home units by Gloxinia to third parties were input taxed supplies of residential premises.

The Commissioner's application for special leave to appeal to the High Court was refused on 1 October 2010 - see FCT v Gloxinia Investments Limited as Trustee for Gloxinia Unit Trust [2010] HCATrans 255 (1 October 2010).

The Decision Impact Statement notes that the Assistant Treasurer issued a press release [No 2011/020] "Clarifying GST Rules Around Residential Property" on 27 January 2011 announcing that the Government will move to amend the GST Act in the light of this decision to ensure that the Act achieves the intended policy outcomes for the GST treatment of residential premises. The press release indicates that the amendments, when enacted, will have some retrospective application.

The Decision Impact Statement sets out the administrative treatment the Commissioner proposes to apply. Further, it states that GSTR 2008/2 will be withdrawn. The Court's decision means that the ATO view outlined in GSTR 2008/2 with respect to development lease arrangements with government agencies is incorrect under the current law.

GSTR 2003/3 will also be reviewed to ensure consistency with the Court's decision.


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