On 22 December 2022, the Full Federal Court handed down its decision in the Landcom Case (Landcom v Commissioner of Taxation [2022] FCAFC 204), which was an appeal the Commissioner lodged against the original Landcom decision. (Please refer to our previous article for more detailed information on the original Landcom decision.)
Background
The original Landcom case was concerned with the sale by Landcom of a freehold interest in four lots of land under a single contract. The two issues were:
- whether the Federal Court has jurisdiction to hear the case; and
- whether Division 75 of the GST law applies to calculate the margin based on the sales of all four freehold lots being a single supply, or whether the sale of the four freehold lots is each a separate supply.
The original Landcom decision was that (1) the Court did have jurisdiction, and (2) the margin scheme was to be calculated based on a separate supply of each of the four lots. The Commissioner appealed against the second issue only.
The Full Federal Court phrased the issue as follows:
The central issue in this appeal is whether, in calculating the margin for the purposes of the margin scheme provided for in Division 75, the sale of the four freehold interests in land constituted a single supply or multiple supplies. If the sale was a single supply, any improvements as at 1 July 2000 on any one of the lots would result in the non-application of item 4 of the table in s 75-10(3) and GST being payable on the entire increase in value of the freehold interest in all four lots, since 1 July 2000.
The Decision
By way of summary, the Full Court decision was as follows:
- they agreed with original Landcom decision (refer paragraph 24);
- ‘the construction contended for by the Commissioner is inconsistent with the structure of the GST Act and the statutory language’ (refer paragraph 25);
- ‘Characterising a supply as a single supply or multiple supplies under s 9-5 does not determine the calculation of the amount of GST payable’ (refer paragraph 26);
- ‘The Commissioner’s contention focusses on the word “supply”, whereas the concept employed in s 75-5(1) is a “taxable supply of real property”.’ (refer paragraph 28);
- ‘Where there is a supply of more than one interest, s 75-10, by its terms, applies to each interest.’ (refer paragraph 31);
- ‘It would be a distortion of the language of the provisions as a whole to read the singular as encompassing the plural.’ (refer paragraph 32);
- Referring to the Acts Interpretation Act 1901, ‘Having regard to the structure and language of Div 75 and the language of s 75-10 (with its focus on “the interest, unit or lease in question”), we do not consider that the singular “interest” in s 75‑10 includes a reference to the plural. We agree with the primary judge’s conclusion (at PJ [196]) that the reference to “the interest” in each of the items in the table is a reference to the particular freehold interest referred to in s 75-5(1)(a).’ (refer paragraph 35);
- ‘This interpretation ensures that the application of the concession is unaffected by the form of the contract of sale by ensuring that GST is not payable on the value of a freehold interest held unimproved by an Australian government agency prior to 1 July 2000, notwithstanding that it is sold together with an interest also held prior to 1 July 2000 but which had been improved in the most minor way prior to 1 July 2000 (by, for example, the addition of a gate or fence).’ (refer paragraph 35); and
- Finally, in response to the Commissioner ‘complaint’ that the interpretation results in undue complexity because of a need to apportion an undissected purchase price, the Full Court stated: ‘it is necessary to ascertain the value of a taxable supply in order to calculate the GST payable in respect of that supply’ and ‘That a construction of the GST Act may give rise to issues of apportionment and valuation is hardly antithetical to the operation of the Act.’ (refer paragraph 38).
Conclusion
This Full Court decision in the Landcom Case should now put this matter to rest.
As we previously concluded, when considering whether there were improvements on the land under Item 4 of s. 38-455, each separate freehold interest is to be considered separately. If there were no improvements on the lot, and Item 4 applies, no GST would be payable as the margin for GST purposes would be ‘nil’.
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