Is real estate still a certainty?

There have been two important developments over the last week for the GST treatment of real property:

• The Commissioner has released two determinations concerning the sale of real property subject to a lease.

1. The first – GSTD 2012/1 – relates to the sale of residential premises that are subject to an input taxed lease.  The determination rules that:
   1. Following a sale of residential premises that are subject to a lease, there is a continued supply of the premises by way of lease which remains an input taxed supply under section 40-35
   2. The purchaser of residential premises is not entitled to an input tax credit under section 11-20 in respect of the purchase of the premises if and to the extent that it is intended that the lease will continue following the completion of the sale.
   3. The purchaser is not entitled to input tax credits for acquisitions relating to the ongoing lease of the residential premises.
   4. The purchaser has an increasing adjustment under Division 135, where residential premises subject to a lease are acquired through a supply of a going concern under section 38-325, or a GST-free supply of farm land under section 38-480, and the purchaser intends that the lease will continue
2. The second – GSTD 2012/2 – relates to commercial  premises that are sold subject to a taxable lease.  The determination rules that:
   1. Following a sale of commercial premises that are subject to a lease, the purchaser of the reversion is liable for GST relating to the lease where the elements of section 9-5 are satisfied
   2. The purchaser’s GST liability is attributed in accordance with the rules in Divisions 29 and 156
   3. The purchaser is entitled to an input tax credit for the acquisition of the premises where the requirements of section 11-5 are satisfied and subsection 75-5(1) (the margin scheme) was not applied to work out the amount of GST payable on the sale of the premises. Further, the purchaser is entitled to input tax credits for acquisitions that relate to the purchase of the premises or to the ongoing lease of the premises where the requirements of section 11-5 are met
   4. The vendor of the commercial premises is not liable for GST relating to the lease where it is no longer in receipt of or entitled to rent or other consideration for the lease following the sale of the reversion.

• Last week, the Commissioner released –  GSTR 2012/D1 – a redraft of the redraft of the ruling  concerning the distinction between residential premises and commercial residential premises. Comments are due of 6 April 2012.

1. The original ruling – GSTR 2000/20 – was 40 pages
2. The redraft – GSTR 2011/D2 and this latest redraft are each 82 pages.

Is the length an indication that the legislation fails to differentiate clearlywhen the input taxation  of real property applies?