The AAT has affirmed the Commissioner’s decision that a taxpayer had an increasing adjustment under Div 135 of the GST Act in relation to 2 apartments purchased in a hotel complex.
The taxpayer, a husband and wife partnership, purchased 2 apartments in the complex. The first purchase took place on 1 September 2006 and the second on 18 January 2008. The original owner of the apartments had previously granted leases to a hotel management company that was obliged to essentially operate a serviced apartment business. The purchases of the apartments were subject to the leases granted to a hotel company and a Management Rights Scheme (which provided the taxpayer with specified returns and income). The supply of each apartment was treated as GST-free under the “going concern” provisions in the GST Act.
Since their purchase, the apartments had been operated as part of the serviced apartment business. The Commissioner claimed that the taxpayer had an “increasing adjustment” because of continuing input tax supplies made in relation to the apartments.
The Tribunal affirmed the Commissioner’s decision. The Tribunal also held that the “proportion of non-creditable use” in this case was 100%. It said the “only supplies made through the ‘enterprise to which the supply relates’ are the input taxed supplies that continue under the leases granted by [the original owners] to the [hotel management company]”.
It also held that the Commissioner’s “Notice to Repay” issued on or around 15 February 2011 was not issued out of time.
(AAT Case [2013] AATA 567, Re The Hotel Apartment Purchaser and FCT, AAT, Ref Nos: 2012/2123-2124, Frost DP, 13 August 2013.)
[LTN 158, 16/8/13]