This Draft Determination, released on Wed 9.4.2014, states that payments made by a vendor to a purchaser of real property when the rent received falls below a rental yield guaranteed by the vendor give rise to an adjustment event for the purposes of Div 19 of the GST Act.
The ATO says this will be the case when:
- the payments are made pursuant to a bilateral agreement between the vendor and the purchaser of the real property; and
- the guaranteed rental yield is a genuine representation of the rental return that the real property is likely to achieve and is representative of how the property is expected to perform in the market place; and
- the agreement between the vendor and the purchaser of the real property is integral to the contractual arrangement under which the parties have agreed to the terms and set the price for the sale of the property; and
- the terms of the agreement between the vendor and the purchaser of the real property include various provisions eg the purchaser agrees to allow the vendor to act as its letting agent, and the vendor guarantees the rental yield of the real property for a set period of time subsequent to its sale to the purchaser.
COMMENTS are due by 9 May 2014. ATO contact – Steve Iselin – Tel: (07) 3213 8417; Fax: (07) 3213 8069; Email: steven.iselin@ato.gov.au.
[FJM Note: What about when ALL of these conditions are not met? Will it fail to be an adjustment event? What will it be then?]
[LTN 68, 9/4/14]