THE Australian Taxation Office commissioner Michael D'Ascenzo has issued two taxpayer alerts warning that the ATO is closely examining uncommercial property arrangements that try to obtain unintended GST benefits.
The ATO will be scrutinising over arrangements where a land owner and its associate delay invoicing and payment for construction services in an attempt to claim input tax credits and/or avoid GST.
The commissioner said the ATO is concerned that these arrangements try to use the GST provisions in a way that is not intended under the legislation.
The first alert relates to arrangements, where an owner of land acquired before July 01 2000 contracts an associate to construct residential premises. The associate neither invoices nor requires payment until after the owner registers for GST, allowing the owner to register as close as possible to the sale of the premises. The purpose of the arrangement is to obtain the dual benefits of minimal GST under the margin scheme and a full input tax credit for construction costs.
And the second alert refers to arrangements involving a land owner engaging an associate to construct residential premises that are to be leased. The associate claims input tax credits that may not otherwise be available to the land owner. The arrangement is also designed to allow the associate to defer, in some cases indefinitely, its GST liability on the supply of construction services to the land owner.
D’Ascenzo said using an associate in this way is often a feature of aggressive tax planning arrangements and the ATO currently have doubts about the effectiveness of the arrangements.
“People who enter into these arrangements run the risk that their tax benefit may be cancelled in which case substantial penalties will apply,” he warned.
Australian Property Journal
