Supplies of residential premises – Federal Court decision

The Federal Court, in a decision delivered 16 December of Sunchen Pty Ltd v Commissioner of Taxation, has clarified whether the subjective intention of the taxpayer in acquiring residential premises “to be predominantly used for residential accomodation” is at all relevant, or whether one looks to the charcateristics of the property at the time of supply. In this case the taxpayer purchased a home and land which had a development approval to erect a block of units. The taxpayer intended to erect the block of units and contended as such that the property was a taxable supply and the taxpayer was entitled to an input tax credit. Not so, said the full Federal Court. One must look not the intention of the taxpayer at the time of acquisition concerning the use to which the taxpayer intends to put the premises supplied, rather an examination must be done of the actuial characeristics of the property at the time of supply. The property supplied was a home and land. The supply was the supply of residential premises and was input taxed. The taxpayer was not entitled to an input tax credit. The ATO has indicated in its decision impact statement issued 21 February 2011, that it agrees with this view

Peter Gell

Peter was admitted as a solicitor in 1981 and holds qualifications in law and a Masters degree in taxation conferred by the University of NSW. Peter practises in taxation advisory, estate planning and wills, probate and commercial law.