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22 Feb 11 Decision Impact Statement - Sunchen

The ATO has issued a Decision Impact Statement in relation to the Full Federal Court's decision in Sunchen Pty Ltd v FCT [2010] FCAFC 138; 2010 ATC 20-229. The case concerned whether property purchased was residential premises "to be used predominantly for residential accommodation" within the meaning of s 40-65(1) of the GST Act 1999, so that the supply of the property would be input taxed.

The Court held that the phrase "to be used predominantly for residential accommodation" in s 40-65(1) of the GST Act 1999 is only concerned with the attributes of the property at the time it is supplied, and to what use those attributes or characteristics are suited. Given this, it was concluded that in determining whether a property is "residential premises to be used predominantly for residential accommodation" the intention of the future owner is irrelevant. In so concluding, the Court clarified that the approach adopted in the decision in Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC 83, which involved a prediction as to future use which could include consideration of subjective intention, is not correct.

The decision confirms the long-held ATO view that s 40-65(1) requires an objective assessment of the nature of the premises rather than a prediction of future use or consideration of the subjective intention of the future owner.

 


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