On Wed 27.6.2018, the Commissioner released a draft of a further Explanation section in his GST Ruling GSTR 2006/6.
This ruling considers the meaning of the phrase “improvements on the land” for GST purposes. The draft seeks to provide further details and clarification of the ATO view in order to make it easier for relevant entities to comply with their GST obligations.
In particular, the draft:
- refers to human interventions that may enhance the usefulness of land. Currently, GSTR 2006/6 simply refers to human interventions that enhance the land’s value;
- notes that while a professional valuer’s opinion may assist in determining whether an intervention enhances the value of land, the valuation concept of “highest and best use” is not relevant; and
- adds new commentary and examples on land with multiple titles and subdivided land.
COMMENTS on the draft are due by 10 August 2018.
Extract from GSTR 2006/6
1. This Ruling discusses the meaning of the phrase ‘improvements on the land’ in the context of the phrases ‘improvements on the land’ or ‘no improvements on the land’ or equivalent phrases in Subdivision 38-N and Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
- These phrases appear in Subdivision 38-N (GST-free grants of land by Governments) and Division 75 (‘Margin Scheme’):
- ‘land on which there are no improvements’ in subsection 38-445(1) and section 38-450;
- ‘no improvements on the land’ in paragraph 38-445(1A)(c);
- ‘no improvements on the land or premises’ in item 4 of the table contained in subsection 75-10(3) and subsection 75-10(3A); and
- ‘improvements on the land or premises’ in item 3 of the table contained in subsection 75-10(3) and in paragraph 75-10(3A)(b).
FJM 2.7.18
[LTN 121, 27/6/18; Tax Month – June 2018]
Study questions (answers available)
- Is the ruling about the meaning of ‘no improvements on … land’ for the purposes of GST-free grants of land by Governments and the application of parts of the ‘margin scheme’?
- Does the Commissioner think that ‘improvements’ mean ‘human interventions’?
- Is a relevant change, the shift from human interventions that ‘increase the value of land’ to those that increase its ‘usefulness’?
- Is the concept of ‘highest and best use’ relevant to this?
