Real estate sale and purchase - GST apportionments of income and expenditure

Section 2(1), Goods and Services Tax Act 1985 - definition of "consideration"

We have been asked if the Goods and Services Tax (GST) treatment of local authority rates apportionments on the sale and purchase of real estate, outlined in Public Ruling BR Pub 99/8, also applies to other income or expenditure that is similarly apportioned.

Public Ruling BR Pub 99/8 published in TIB Vol 11, No 11 (December 1999) (with a minor correction in TIB Vol 12, No 2 (February 2000)), sets out the GST treatment of local authority rates apportioned at the time of settlement on the sale and purchase of real estate.  The Commissioner's view is that rates apportionments form part of the consideration for the supply of real estate and, where the transaction is subject to GST, should be taken into account in calculating the applicable GST.

If other expenditure (such as insurance) or income (such as commercial rental) is apportioned at settlement, these apportionments should be treated in a manner consistent with Public Ruling BR Pub 99/8.  Provided the apportionment is determined on a contractual basis between the vendor and purchaser at the time of settlement, the apportionment will form part of the "consideration" of the supply of the real estate.  For the reasons set out in Public Ruling BR Pub 99/8, the GST consequences will depend on whether the vendor and/or purchaser are GST registered persons and whether the transaction forms part of a taxable activity.