GST Article ‘ GST implications of Developer Contributions

The GST law contains specific rules which deal with cash and ‘in-kind’ contributions made by a Developer. This article looks at some aspects these.

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The GST law contains special rules that apply in specific circumstances. Examples are Division 81 dealing with Australian taxes, fees and charges, and Division 82 which deals specifically with transactions relating to rights to develop land.

It is relatively common for Councils to impose conditions to development approvals, and such conditions may require either an in-kind or cash contribution from the Developer.

In-Kind Developer Contributions

The intent of Division 82 (as per s. 82-1) is as follows:

‘GST does not apply to transactions for making supplies (commonly referred to as in kind developer contributions) in return for the supply by an Australian government agency of a right to develop land.’

For completeness, we also refer to s. 82-5(1) which provides:

‘The supply, by an Australian government agency, of a right to develop land is not treated as consideration for another supply if the other supply complies with requirements imposed by or under an Australian law.”

Given the above, consider, by way of example, the following scenario:

  • A developer (the Developer’) applies to Council for development approval for a specific property.
  • The Developer would be required by Council to pay an application fee (assume: not subject to GST, being a fee covered by Division 81 of the GST law).
  • If the application is successful, Council would provide the Developer with approval to develop the property.
  • Let’s assume that in granting the approval, Council imposes some conditions, one of which is that the Developer is required to make an in-kind contribution to Council.
  • Let’s also assume that the in-kind contribution comes in the form of building a road.
  • Developer and Council are both GST-registered.

Ignoring the payment of the application fee (which we have assumed is covered by Division 81 and not subject to GST), in the above example, the transactions taking place are:

  1. Council is granting the Developer a right to develop the property subject to the condition that the Developer builds a road.
  2. Developer is supplying a completed road to Council in return for the right to develop the land.

It is essentially a barter or contra supply.

Assuming the cost of the road to the Developer is $1.1m (including GST), if Division 82 did not exist then the Developer would need to account for GST when it supplies the road to Council. From the Developer’s perspective it is agreeing to make a supply of a completed road and in return receives consideration being the right to develop the property (which, in this example, and as the parties are dealing with each other at arm’s length, has a value of $1.1m).

The effect of Division 82, however, is that the supply made Council being the right to develop the property is not treated as consideration for another supply (i.e. the supply of the road) but only if the supply of the road ‘complies with requirements imposed by or under an Australian law’. Assuming the approval is granted under local government laws, and those laws require the contribution of capital works such as the completed road, then this condition would appear to be met.

Cash Developer Contributions

In the above example, if instead of providing a completed road the Developer was required to provide a cash contribution, then it appears that such contributions would be covered by Division 81. That is, assuming under the local government laws Council is allowed to impose such cash contributions as a condition of development approval, then the amount received would be not be consideration pursuant to the operation of s. 81-10(1) and s. 81-10(4) being a fee or charge that relates to the provision of a permission, authority or licence under an Australian law. (Alternatively it may be exempt under s. 81-15 by virtue of paragraph 81-15.01(1)(f) of the GST Regulations.)


The above provisions apply neatly where there is a specific cash contribution for a nominated amount. They also apply neatly where there is an in-kind contribution and that is all that is supplied. We are aware that there may be some situations where the in-kind contributions go beyond what is required by the development approval conditions. The GST treatment of such situations is beyond the scope of this article, but may depend on a combination of what is being supplied and the specific application of local government laws.


Editor’s Note:

There are a wide range of specific GST rules that relate to property transactions involving Government and not-for-profit entities. For an in-depth analysis of such rules we are currently running all-day face-to-face workshops on GST & Property for Government & NFPs. Click here for more information and/or to register. If you can’t make to it one of the workshops, we are also running live online webinars on GST Property Fundamentals (one hour) and GST Property Advanced (two hours), with discounts if you book both online sessions as a series.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.