I have received the following comment from a solicitor in relation to our sale of land, can anyone provide further information or answer the questions asked.
“Usually if there is a supply in Australia for consideration by a vendor who is
registered or should be registered for GST, GST would be payable. Those
elements are satisfied here and so it becomes relevant to see if any exemptions
may be available. If there are, Council will be able to retain a greater share of sale
proceeds.
Unfortunately there is no specific provision in the GST legislation which relates to
a Council sale for unpaid rates. The nearest would appear to be Section 105.5 of
A New Tax System (Goods and Services Tax) Act 1999 which relates to “Supplies
by Creditors in Satisfaction of Debts May Be Taxable Supplies”. The English translation of the section is basically that if the person who owned the land would have had to pay GST on its
sale then Council will need to. If however the owner would not have had to pay
GST on the sale Council need not pay GST. Unfortunately there are some rather
unrealistic requirements for the GST free alternative. These are:
• That the owner has given you a written notice indicating that the supply
would not be taxable. Even in the best of scenarios it is unlikely that the
owner would want to co-operate in this way. Here, given that many of these
owners have disappeared decades ago, Council’s chances are slim. If you
are in contact with the owner, the notice should also set out why the supply
would not be taxable; or
• If Council cannot obtain the notice, Council must “believe on the basis of
reasonable information that the supply would not be a taxable supply” if the
owner were to sell. The obvious possibility here is that, because the land
is residential and the vast majority of owners appear to be private
individuals, they would be exempt from GST as not being required to be
(nor actually) registered for GST purposes. The only apparent exception
may be where owners appear to be developers or investors.
In summary then Council should review each parcel and then identify whether the owner,
if it had sold, would have supplied the land in the course of some enterprise and so had
to pay GST, or not. In the latter case Council need not remit GST and can therefore keep
the entire sale proceeds, if GST has to be remitted however, Council will lose 1/11 of the
net sale proceeds”.
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