GST And Forfeited Deposits.FCT FCT Faculdade de Ciências e Tecnologia (Portuguese University) FCT Fundamentals of Computation Theory FCT Fundação para a Ciência e a Tecnologia (Portuguese Science and Technology Foundation) -v- Reliance Carpet Co Pty Limited is of interest to people selling properties because it was the first GST GST abbr. Greenwich sidereal time GST (in Australia, New Zealand, and Canada) Goods and Services Tax case heard in the High Court and involved the forfeiture of a deposit. Facts The purchaser of a property failed to settle in time and the sale contract was rescinded and the deposit forfeited to the vendor. The purchaser's accountant requested a tax invoice for the forfeited deposit. The vendor declined to provide a tax invoice on the basis that the deposit was retained as damages in part satisfaction of the vendor's loss and was not consideration for a taxable supply. The vendor was assessed for GST on the forfeited deposit, and objected to the assessment. High Court of Australia The High Court of Australia is the final court of appeal in Australia, the highest court in the Australian court hierarchy. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the Decision The High Court unanimously affirmed the ATO's decision that the forfeiture of a deposit, as rendered under a standard land contract, is consideration for a supply for the purposes of the GST Act. Practical Consequences - Should vendors require a deposit of 11%? Is it necessary, in contracts for sale of real estate entered into by vendors registered (or required to be registered) in the course or furtherance fur·ther·ance n. The act of furthering, advancing, or helping forward: "Pakistan does not aspire to any . . . role in furtherance of the strategies of other powers" Ismail Patel. of an enterprise, to require the purchaser to pay more than a ten per cent deposit to cover the potential GST imposition on the vendor if there is a forfeiture of the deposit? As only a small percentage of sales are made by vendors registered for GST purposes in the course or furtherance of an enterprise and as an even smaller percentage of those sales fail to proceed to completion, it is problematic whether the contract of sale should contain any gross up or increased deposit mechanism. There may be a place for an 11% deposit in commercial contracts. But great care and our advice should be sought if a gross up is proposed - for example in Queensland if a deposit is more than 10% the contract will be deemed an instalment contract giving the purchaser additional rights and making termination of the contract by the vendor more difficult. It may be preferable for vendors to either absorb the GST (on the deposit) as a cost of business or, alternatively, increase the sale price by an amount to cover the contingency. The case also has implications for other kinds of forfeited deposits, like deposits on contracts for provision of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. generally. But the ATO ATO Australian Taxation Office ATO Ambito Territoriale Ottimale (Italy) ATO Alpha Tau Omega ATO Air Traffic Organization (FAA) ATO Arab Towns Organization ATO Air Tasking Order ATO Assemble To Order , in a revised impact statement after the decision, says GST will not apply to a forfeited deposit if the underlying transaction would have been GST free or input taxed. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Mr Ned Boyce Hunt & Hunt Gateway 1 Macquarie Place Macquarie Place is a small, triangular park in downtown Sydney, Australia. It is located at the corner of Bridge Street and Loftus Street, and is named after Governor Lachlan Macquarie. Sydney NSW NSW New South Wales Noun 1. NSW - the agency that provides units to conduct unconventional and counter-guerilla warfare Naval Special Warfare 2000 AUSTRALIA Tel: 293913000 Fax: 293913099 E-mail: jburns@hunthunt.com.au URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : www.hunthunt.com.au Click Here for related articles (c) Mondaq Ltd, 2008 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com |
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