GST and Court consent order

Is the entity, a landowner, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives payment under a court consent order for the compulsory acquisition of its land, gazetted after 1 July 2000?

Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when it receives payment under a court consent order for the compulsory acquisition of its land, gazetted after 1 July 2000.

The entity is a land owner.

A parcel of land was compulsorily acquired from the entity. The Notice of Acquisition for the compulsory acquisition of the land was gazetted after 1 July 2000. The entity commenced a court action regarding the compensation for the compulsory acquisition.

A court consent order was made after 1 July 2000 that specified an amount payable for various claims including the compensation for the compulsory acquisition.

The entity is registered for goods and services tax (GST). The 'transaction' satisfies the other requirements in section 9-5 of the GST Act.

Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5 of the GST Act.

Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(d) of the GST Act states that a supply includes a grant, assignment or surrender of real property. In this case, a parcel of the entity's land is compulsorily acquired. Therefore, the supply is the surrendering of the land by the entity.

The next step is to determine whether the payment received by the entity because of the court consent order is for the supply of the entity's land.

Goods and Services Tax Ruling, GSTR 2001/4 provides guidance as to the application of GST to court orders and out-of-court settlements. Paragraph 100 of GSTR 2001/4 provides that there must be a sufficient nexus between the payment made under the court order (including consent orders) and a supply before GST may apply.

Paragraph 101 of GSTR 2001/4 provides that: 'Where the only supply (other than a discontinuance supply) in relation to a court order or out-of-court settlement is an earlier supply and a sufficient nexus exists between the payment made under that order or settlement and the earlier supply, the payment will be consideration for that supply.'

The entity's land was compulsorily acquired and the amount received by the entity under the court consent order includes compensation for this compulsory acquisition. Therefore, it is considered that there is a sufficient nexus between the supply of the land and the payment of compensation under the court consent order.

In this case, the consideration received by the entity is for the compulsory acquisition of its land and the transaction is a supply that satisfies the other requirements in section 9-5 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act, when it receives payment under a court consent order for the compulsory acquisition of its land.