Container Homes Designer Domain Pty Ltd v FC or T
The above-mentioned case recently heard by the AAT, broadly, involved an arrangement for a company to be supplied with goods for consideration. Upon entry into the arrangement the company paid a ‘deposit’ of 50% of the agreed total price.
The company subsequently withdrew from the arrangement without taking delivery of the goods but stated the taxpayer could retain the deposit.
Section 99-5 (GST Act) provides that a deposit held as security for the performance of an obligation is not treated as consideration for a supply unless:
- the deposit is forfeited because of failure to perform the obligation, or,
- is applied as all or part of the consideration for a supply.
The AAT initially held that certain documents evidenced a contract for the sale, thereby establishing an obligation for performance (see (a) above).
However, it was later found that the upfront payment was described in the documents as an ‘advance’, and not properly characterised as “a deposit held as security for the performance of an obligation”, therefore the taxpayer was not liable to remit GST when the amount was forfeited.
This decision was based on the particular facts and circumstances of the situation and the documentation provided and serves as a reminder to always read the relevant contracts/agreements and properly consider the circumstances to ensure GST treatment is applied correctly.
If you have any questions, please feel free to reach out.