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15 Apr 14 High Court grants leave in GST lease case - MBI Properties

On 11 April 2014, the High Court (Kiefel, Gageler and Keane JJ) granted the Commissioner special leave to appeal from the decision of the Full Court of the Federal Court in MBI Properties Pty Limited v FCT [2013] FCAFC 112 (18 October 2013).

The Full Court held that the taxpayer did not have an increasing adjustment in the amount of $215,000 (representing 10% of the total purchase price for three apartments it purchased from South Steyne Hotel Pty Limited ("South Steyne") in October 2007) within the meaning of Div 135 of the GST Act for the relevant quarter.

The three apartments purchased by the taxpayer were subject to leases previously granted by South Steyne to Mirvac Management Pty Limited (Mirvac). One of the issues before the Court was whether there was a continuing supply by the taxpayer to Mirvac under the lease.

In the Full Court, Edmonds J, with whom the other judges agreed, held:

"...the 'supply' is the grant of the lease: see s 9-10(2)(d) of the GST Act. The act of grant does not continue for the term of the lease; the 'supply' is complete on the lease coming into existence. The 'supply' constituted by the grant of the lease did not continue beyond the grant; the fact that the lease continued was solely a function of the terms of the grant, not a continuing supply by the grantor."

The Full Court held that as there was no continuing supply, the terms of s 135-5(1) of the GST Act (which required a supply) were not met, and there was no increasing adjustment.

For a copy of the transcript of the special leave application, go here

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