Income tax and goods and services tax: tax consequences for an Owner entering into a Concurrent Lease with Future Rent Pty Ltd

This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified in the Ruling section apply to the defined class of entities who take part in the scheme to which this Ruling relates. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise indicated.

In this Product Ruling the scheme involves entry into a concurrent lease with Future Rent Pty Ltd (Future Rent) or a subsidiary of Future Rent [1] over a property (the Property) that is subject to a current residential tenancy agreement.

This Product Ruling does not address: • the Owner's tax obligations and benefits in relation to the acquisition, holding and sale of the Property • for the purposes of section 104-10, the reduced cost base of the Owner Rights assigned to Future Rent by the Owner • for the purposes of section 104-25, the reduced cost base of the contractual rights of the Owner under the Concurrent Lease at the time of their discharge or satisfaction • for the purposes of section 104-110, the expenditure which may be incurred by the Owner to grant the Concurrent Lease to Future Rent • the tax consequences on extension of the Concurrent Lease in the circumstances set out in paragraph 19(v) of this Product Ruling • the tax consequences where the Owner nominates another person to receive the Rental Prepayment from Future Rent as set out in paragraph 19(g) of this Product Ruling • the tax consequences for an investor in any managed investment scheme which may be a party to the Concurrent Lease as concurrent lessee, and • the tax consequences for the Tenant.

This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. In this Product Ruling, those entities that can rely on the Ruling section are referred to as Owners.

The class of entities that can rely on the Ruling section of this Product Ruling consists of those entities that enter into the scheme described in paragraphs 16 to 20 of this Product Ruling on or after the date this Product Ruling is made and on or before 30 June 2021.

The class of entities that can rely on the Ruling section of this Product Ruling does not include entities: • that are non-residents for Australian taxation purposes, or • that are accepted to participate in the scheme described in paragraphs 16 to 20 of this Product Ruling before the date of this Ruling or after 30 June 2021.

This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. Trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of SISA.

The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 20 of this Product Ruling.

If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then: • this Product Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled, and • this Product Ruling may be withdrawn or modified.

This Product Ruling applies prospectively from 22 August 2018, the date it is published. It therefore applies only to the specified class of entities that enter into the scheme from 22 August 2018 until 30 June 2021, being its period of application. This Product Ruling will continue to apply to those entities even after its period of application has ended for the scheme entered into during the period of application.

However the Product Ruling only applies to the extent that there is no change in the scheme or in the entity's involvement in the scheme.

Although this Product Ruling deals with the income tax laws enacted at the time it was issued, later amendments may impact on this Product Ruling. Any such changes will take precedence over the application of this Product Ruling and, to that extent, this Product Ruling will have no effect.

Entities who are considering participating in the scheme are advised to confirm with their taxation adviser that changes in the law have not affected this Product Ruling since it was issued.

Product Rulings were introduced for the purpose of providing certainty about tax consequences for entities in schemes such as this. In keeping with that intention the Commissioner suggests that promoters and advisers ensure that participants are fully informed of any legislative changes after the Product Ruling has issued.

Subject to paragraph 3 of this Product Ruling and the assumptions in paragraph 20 of this Ruling: (a) The Rental Prepayment from Future Rent to the Owner will be assessable to the Owner as ordinary income under section 6-5 on an accruals basis over the term of the Concurrent Lease (that is, the period for which the payment is made). (b) The amount of the Rental Prepayment taken to have accrued to the Owner during an income year is that which: (i) has ceased to be subject to Future Rent's right to the Rental Refund Amount, and (ii) has not been included as assessable income in a prior income year. (c) The Additional Rent from Future Rent to the Managing Agent (on the Owner's behalf) will be assessable to the Owner as ordinary income under section 6-5 on a receipts basis (that is, at the time it is paid to the Managing Agent). (d) Any Management and Administration Fee incurred by the Owner under the Concurrent Lease will be deductible under section 8-1 in the income year it is incurred. (e) An amount paid by the Owner to reimburse Future Rent for any Rectification Costs incurred by Future Rent under the Concurrent Lease will be deductible under section 8-1 in the income year incurred. (f) The Owner will not make a capital gain under subsection 104-110(3) on the grant of the Concurrent Lease to Future Rent. (g) The Owner will not make a capital gain under subsection 104-10(4) on assignment of their Owner Rights to Future Rent under the Concurrent Lease. (h) CGT Event C2 under section 104-25 will happen to the Owner on discharge or satisfaction of their contractual rights under the Concurrent Lease (at the time of surrender or termination of the Concurrent Lease). (i) Should the Concurrent Lease constitute a financial arrangement for the purposes of Division 230, it would be the subject of an exception to the application of that Division pursuant to paragraph 230-460(2)(d) as an arrangement that, in substance or effect, depends on the use of the Property (an asset that is real property) and gives Future Rent a right to control the use of the Property. (j) The supply of the Property by the Owner by way of the Concurrent Lease will be input taxed pursuant to section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). (k) Provided the scheme ruled on is entered into and carried out as described in this Product Ruling, the anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) will not apply to the Owner in respect of their entry into the Concurrent Lease.

The scheme that is the subject of this Product Ruling is identified and described in the following: • application for a Product Ruling as constituted by documents and information received on 24 November 2017, 29 May 2018 and 10 July 2018 and 20 February 2019, and • draft Concurrent lease (transfer of rental income) (the Concurrent Lease), received on 20 February 2019. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation.

For the purposes of describing the scheme to which this Product Ruling applies, there are no other agreements, whether formal or informal, and whether or not legally enforceable, which an Owner or an associate of an Owner, will be a party to, which are a part of the scheme. Unless otherwise defined, capitalised terms in this Product Ruling take their meaning as per the Concurrent Lease referred to in paragraph 16 of this Product Ruling.

All Australian Securities and Investments Commission (ASIC) requirements are, or will be, complied with for the term of the agreements.

Following is a summary of the scheme: (a) Future Rent will enter into concurrent leases, as the concurrent lessee, with residential landlords (the Owners), pursuant to which Future Rent will accept a lease of properties in Australia that are subject to a current residential tenancy agreement as at the Commencing Date (an Existing Lease). (b) Each Concurrent Lease is granted to Future Rent by an Owner subject to and concurrent with the Existing Lease. (c) Pursuant to the terms of the Concurrent Lease and at all times during the Lease Term, Future Rent: (i) is entitled to collect any rent payable by the Tenant to the Owner (as the lessor) under the Residential Lease (meaning the Existing Lease and any future underlying leases which commence at the expiry of the Existing Lease with the existing or new tenants) (ii) is not entitled to occupy the Property (with the right to exclusive possession to the Property being retained by the Tenant) (iii) must only use the Property to collect rent from the Residential Lease (the Permitted use) (iv) must comply with all obligations imposed on the Owner under the Residential Lease (except for the obligations referred to in paragraph 19(e) below) and is entitled to enforce all rights and remedies of the Owner under the Residential Lease, and (v) has the right to vary and, where appropriate, terminate or enter into any new Residential Lease or appoint a new property manager (Managing Agent). (d) To the extent that the Concurrent Lease doesn't put Future Rent, during the Lease Term, in the same position as the Owner under the Existing Lease in terms of enforcing all of the covenants, obligations and undertakings given to the Owner in connection with or under the Existing Management Agreement and/or Existing Lease (the Owner Rights), then: (i) the Owner assigns to Future Rent the benefit of all lessee covenants in the Existing Lease and all of its rights under the Existing Management Agreement to the extent that it relates to the Property, and (ii) to the extent that any of the Owner Rights are not assignable, the Owner holds the benefit of the relevant Owner Right for the benefit of Future Rent, and if directed by Future Rent must enforce the relevant Owner Right for Future Rent. (e) The Owner's obligations in the Residential Lease relating to payment of Property Costs (that is, costs in respect of the ownership, management, operation, maintenance, use and occupation of the Property) and repair, maintenance and works on the Property remain the responsibility of the Owner to the extent they arise during the Lease Term. (f) Pursuant to the terms of the Concurrent Lease, the Owner: (i) must keep the Property in good repair and condition to the extent required under the Residential Lease (ii) remains responsible for paying any fees to the Managing Agent (iii) is liable to reimburse Future Rent for any Rectification Costs (that is, costs incurred by Future Rent as a result of it electing to remedy any default by the Owner under the Concurrent Lease) (iv) must direct the Managing Agent to promptly secure a new tenant under a Compliant Lease when the Residential Lease is due to terminate or expire (v) must pay a Management and Administration Fee, if any, to Future Rent at the end of the Lease Term for their services in assessing, processing and managing the Owner's application for entry into the Concurrent Lease, and (vi) is entitled to be paid the Concurrent Lease Rent by Future Rent, being the sum of the Rental Prepayment and the Additional Rent. (g) The Rental Prepayment, payable to the Owner (or to a person nominated by the Owner in writing) within seven days after the Commencing Date, is a prepayment of rent calculated on the basis of a percentage of the Residential Net Rent that Future Rent will expect to receive under the Residential Lease (as defined in paragraph 19(j) below). (h) Where: (i) the remaining term of the Existing Lease is less than six months, Future Rent will offer to make a Rental Prepayment calculated on the basis of a percentage of the expected Residential Net Rent for up to 12 months (ii) the remaining term of the Existing Lease is between six and 12 months, Future Rent will offer to make a Rental Prepayment calculated on the basis of a percentage of the expected Residential Net Rent for up to double the remaining term, and (iii) where the remaining term of the Existing Lease is between one and two years, Future Rent will offer to make a Rental Prepayment calculated on the basis of a percentage of the expected Residential Net Rent for a period of up to two years. (i) The relevant percentage referred to in paragraphs 19(g) and (h) above will represent an appropriate discount determined by Future Rent using an algorithm that primarily takes into account the risk associated with the Property and Owner. (j) The Residential Net Rent is the estimated total of all amounts expected to be collected under the Residential Lease during the Expected Term (the Residential Gross Rent) less the estimated total of the Additional Rent expected to be paid during the Expected Term. (k) The Additional Rent, payable by Future Rent on the Owner's behalf to the Managing Agent on the first day of each month (or as soon as practicable), is calculated as a fixed percentage of the actual rent collected from the Tenant by the Managing Agent on behalf of Future Rent under the Residential Lease. (l) The Additional Rent payable by Future Rent will first be set off by Future Rent against any outstanding Rectification Costs in respect of which the Owner is liable to reimburse Future Rent. (m) The Owner irrevocably instructs the Managing Agent to use the amount paid by Future Rent as Additional Rent, together with any additional amounts standing to the credit of the Owner in the Agent's Trust Account, on the Owner's behalf, to pay: (i) the Costs of all of the obligations of the Owner in respect of the Property and the Residential Lease under the Concurrent Lease (the Owner Retained Obligations) and any outstanding Rectification Costs, as and when they fall due, and (ii) at the end of each month, any balance to the Owner (subject to a contrary instruction from the Owner). (n) The default term of each Concurrent Lease will be three years. Where the term of the Concurrent Lease exceeds the term of the Existing Lease, Future Rent may enter into a new Residential Lease. (o) The Concurrent Lease will automatically be surrendered when either: (i) the rent collected by Future Rent under the Residential Lease less any Additional Rent paid to the Owner (the Actual Net Collections) equal or exceed the Residential Net Rent and there are no outstanding Rectification Costs, or (ii) the Owner requires Future Rent to surrender the Concurrent Lease by written notice and the Owner has met its obligations under the Concurrent Lease. (p) Where the Property, or any part of it, is damaged, destroyed or rendered substantially inaccessible so that it is wholly or substantially unfit for occupation and use of the Tenant, the Owner is required to claim on any insurance and either reinstate the Property within a reasonable time or require Future Rent to surrender the Concurrent Lease. (q) Immediately upon surrender of the Concurrent Lease in the circumstances set out in paragraphs 19(o) or (p) above, the Owner becomes the landlord under any current Residential Lease. (r) The Concurrent Lease may be terminated: (i) by Future Rent upon occurrence of a Default Event and notice to the Owner, or (ii) by either Future Rent or the Owner where the Property is resumed to the extent that it is no longer wholly or substantially fit as a residence. (s) Upon termination of the Concurrent Lease in the circumstances set out in paragraph 19(r) above, the Residential Lease also terminates. (t) At the end of the Lease Term, by surrender or termination and to the extent permitted and effective, Future Rent assigns to the Owner the benefit of all lessee covenants in any current Residential Lease. (u) Where: (i) the Owner exercises its unqualified right to require Future Rent to surrender the Concurrent Lease, as per paragraph 19(o)(ii) above (including in the circumstances set out in paragraph 19(p) above), or (ii) the Concurrent Lease is terminated under either circumstance set out in paragraph 19(r) above, the Owner must refund to Future Rent a portion of the Rental Prepayment (if any) referred to as the Rental Refund Amount. The Rental Refund Amount amortises to nil over the term of the Concurrent Lease. (v) The term of a Concurrent Lease will be extended beyond its three year term where, as at the Expiry Date, either the Actual Net Collections are less than the Residential Net Rent or any Rectification Costs are outstanding. Where this occurs, the Concurrent Lease will continue on a monthly basis at a rental equal to $1 per month until either Future Rent chooses to terminate, or such time as the Actual Net Collections equal or exceed the Residential Net Rent and there are no outstanding Rectification Costs.

This Product Ruling is made on the basis of the following assumptions: (a) The Owner is an Australian resident for taxation purposes. (b) Any Rectification Costs incurred by Future Rent are incurred to remedy the Owner's failure to repair the Property (or part of the Property) and would have been deductible to the Owner under section 25-10 had they been incurred by the Owner. (c) The Property constitutes 'residential premises' (as defined in section 195-1 of the GST Act) and is not 'commercial residential premises' (as defined in section 195-1 of the GST Act). (d) The Property is used predominantly for residential accommodation. (e) The Owner Rights will have a market value of nil at the time of their assignment by the Owner to Future Rent. (f) The Owner's rights under the Concurrent Lease will have a negligible market value at the time of their discharge or satisfaction on surrender or termination of the Current Lease. (g) The scheme will be executed in the manner described in the Scheme section of this Product Ruling and the Concurrent Lease referred to in paragraph 16 of this Product Ruling. (h) All dealings between the Owner, Future Rent, the Tenant and the Managing Agent will be at arm's length.

Section 6-5 includes income according to ordinary concepts (ordinary income) in assessable income. Whether or not a particular amount is income according to ordinary concepts depends on the nature and character of the receipt in the hands of the taxpayer. Rental income is regarded as ordinary assessable income.

Pursuant to subsection 6-5(2) ordinary income is included in the assessable income of an Owner when it is derived by that Owner. The word 'derived' is not defined under the Income Tax Assessment Act 1997 but is equivalent to 'arising or accruing' (Harding v. Federal Commissioner of Taxation (1917) 23 CLR 119 per Isaacs J at 133). Income is taken to be derived when it has 'come home' to the Owner, that is to say it has been earned and, depending on the nature of the source of the income, there is sufficient certainty as to its being realised (Commissioner of Taxes (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd (1938) 63 CLR 108 (Carden's case) per Dixon J at 155-159). Such certainty is determined by reference to not only legal rights and obligations but also business and commercial realities (Arthur Murray (NSW) Pty Ltd v. Commissioner of Taxation (1965) 114 CLR 314 at 318-319).

The time at which an amount represents 'income derived' by an Owner depends on the nature of the income and the circumstances in which it is derived. Further, the accounting method to be used in determining when income is derived depends on its 'actual appropriateness' and in particular on 'whether in the circumstances of the case it is calculated to give a substantially correct reflex of the taxpayer's true income' (Carden's case per Dixon J at 155).

The appropriate accounting method to be used to account for a prepayment of rent as ordinary income has been considered by the Taxation Board of Review. In Case B47 70 ATC 236, the Taxation Board of Review, by majority, found that the prepaid rent under the lease in question, which provided for the repayment by the lessor to the lessee of any unexpired proportion of rent calculated at a weekly rate where the lease was terminated other than in the case of the lessee's default or breach, did not come home to the lessor when received by them so as to constitute income derived at the time of receipt, and should be apportioned over the term of the lease.

That decision was distinguishable from that held by the Taxation Board of Review in Case 51 70 ATC 253 where the lessor, having received the rent in advance per the terms of the lease agreement in question, was under no obligation to refund any part of it. In this case, the Taxation Board of Review concluded that there was no ground for a view that the lessor did not derive the whole of the rent when it was paid to them.

The existence (or otherwise) of the lessee's right to a pro-rata refund for the unexpired portion of the term was emphasised as the critical feature in both cases. The Commissioner similarly confirmed in Taxation Ruling TR 2002/14 Income tax: taxation of retirement village operators that rent, paid by a resident granted a lease in a retirement village, in advance and subject to a pro-rata refund upon early termination of the lease, should be brought to account over the period for which the payment is made.

As per paragraph 19(u) of this Product Ruling, the Concurrent Lease requires the Owner to refund the Rental Refund Amount (being a portion of the Rental Prepayment) on early surrender or termination of the Concurrent Lease (other than a surrender under the circumstances set out in paragraph 19(o)(i) of this Product Ruling). The Rental Refund Amount lessens over the term of the Concurrent Lease as rent is collected by Future Rent under the Residential Lease.

The existence of this broad right of refund under the Concurrent Lease means that the Rental Prepayment paid by Future Rent to the Owner in advance for the Permitted Use over the fixed Lease Term does not 'come home' to the Owner in a realised or immediately realisable form (that is, is not derived) at the time of receipt. Accounting for the Rental Prepayment as assessable ordinary income on an accruals basis over the term of the Concurrent Lease, as and when it periodically and proportionately ceases to be subject to the refund right, will provide the most substantially correct reflex of that income for the Owner.

The Additional Rent paid to the Managing Agent on behalf of the Owner by Future Rent on a monthly basis is not refundable, and will have come home to the Owner in a realised or immediately realisable form (i.e. be derived) at that time.

A loss or outgoing is deductible under section 8-1 if its essential character is that of expenditure that has a sufficient connection with the operations or activities which more directly gain or produce a taxpayer's assessable income, provided that the expenditure is not of a capital, private or domestic nature.

Any Management and Administration Fee incurred by the Owner under the Concurrent Lease is paid for Future Rent's time and resources in assessing, processing and managing the Owner's Concurrent Lease application. It has a sufficient connection with the gaining of assessable income or, where applicable, with the carrying on of a business for the purpose of gaining assessable income, being the Concurrent Lease Rent, to be deductible under section 8-1 in the income year in which it is incurred. The Management and Administration Fee is not a payment by the Owner for the surrender or termination of the Concurrent Lease and is therefore not of a capital nature.

Any amounts paid by the Owner to reimburse Future Rent for any Rectification Costs incurred by Future Rent under the Concurrent Lease are, pursuant to the assumption at paragraph 20(b) of this Product Ruling, in respect of repairs to the Property (or part of the Property) from which the Owner is deriving assessable Concurrent Lease Rent, and therefore have a sufficient connection with the gaining of assessable income or, where applicable, with the carrying on of a business for the purpose of gaining assessable income, to be deductible under section 8-1 in the income year incurred.

The granting of the Concurrent Lease by the Owner to Future Rent gives rise to a CGT event F1 under section 104-110 in respect of the Owner.

A capital gain from this CGT event may be made if the capital proceeds from the grant of the lease exceed the expenditure incurred to grant it or, alternatively, a capital loss from this CGT event may be made if those capital proceeds are less than the expenditure incurred to grant it (subsection 104-110(3)).

The capital proceeds from CGT event F1 are any premium paid or payable for the grant of the lease (subsection 116-20(2)).

The Rental Prepayment payable to the Owner is, as described in the Concurrent Lease, a prepayment of rent (i.e. a prepayment for the ongoing use of the Property to collect rent from the Residential Lease during the Lease Term), and not a premium (i.e. consideration paid for the grant of the Concurrent Lease). Factors supporting this conclusion include: • the existence of the right of refund to a portion of the Rental Refund Amount in a broad set of circumstances, as per paragraph 19(u) of this Product Ruling (see TR 2002/14) • the existence of the right of abatement in the event the Property is damaged, destroyed or rendered substantially inaccessible, as per paragraph 19(p) of this Product Ruling, or in the event the Property is resumed to the extent it is no longer wholly or substantially fit as a residence, as per paragraph 19(r)(ii) of this Product Ruling (see Frazier v. Commissioner of Stamp Duties (NSW) 85 ATC 4735; (1985) 17 ATR 64), and • the calculation of the Rental Prepayment on the basis of monthly rent of a fixed amount over the Expected Term.

On the basis that the Owner will not be paid a premium (capital proceeds) for the grant of the Concurrent Lease to Future Rent, they will not make a capital gain under subsection 104-110(3) from the CGT Event F1.

Contractual rights under a lease or other agreement (such as the Existing Lease and the Existing Management Agreement) are legally enforceable rights and therefore a CGT asset according to the definition in subsection 108-5(1).

An assignment by the Owner of their Owner Rights to Future Rent gives rise to CGT event A1 under section 104-10. A capital gain from this CGT event may be made if the capital proceeds from the disposal of the asset are more than the asset's cost base or, alternatively, a capital loss from this CGT event may be made if those capital proceeds are less than the asset's reduced cost base (subsection 104-10(4)).

Generally, where no capital proceeds are received from a CGT event the market value substitution rule in subsection 116-30(1) will apply to include the market value of the CGT asset that is the subject of the event (as at the time of the event) as the amount received.

As the Owner will not receive any capital proceeds for the assignment of their Owner Rights, the Owner will be taken to have received the market value of the Owner Rights as at the time of the assignment pursuant to the market value substitution rule.

On the basis that the Owner Rights have a market value of nil (in accordance with the assumption at paragraph 20(e) of this Product Ruling), the Owner's capital proceeds from their assignment will be nil and the Owner will not make a capital gain under subsection 104-10(4) from the CGT event A1.

The rights of the Owner under the Concurrent Lease are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1).

Where the Concurrent Lease is surrendered or terminated, the Owner's ownership of the contractual rights under the Concurrent Lease is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 under paragraph 104-25(1)(b).

A capital gain from this CGT event may be made if the capital proceeds from the ending of the ownership of the asset are more than the asset's cost base or, alternatively, a capital loss may be made from this CGT event if those capital proceeds are less than the asset's reduced cost base (subsection 104-25(3)).

As the Owner will not receive any capital proceeds for the discharge or satisfaction of their rights under the Concurrent Lease on surrender or termination of the Concurrent Lease, as the case may be, the Owner will be taken to have received the market value of those rights as at the time of their discharge or satisfaction, and as if the event hadn't occurred and was never proposed to occur, pursuant to the market value substitution rule in subsections 116-30(1) and 116-30(3A).

On the basis that the Owner's rights under the Concurrent Lease will have a negligible market value at the time of their discharge or satisfaction (in accordance with the assumption at paragraph 20(f) of this Product Ruling), the Owner is likely to make a capital loss to the extent to which the reduced cost base of the rights under the Concurrent Lease exceed their market value.

GST is not payable on a supply that is input taxed (section 40-1 of the GST Act). A supply is input taxed if it is input taxed under Division 40 of the GST Act (paragraph 9-30(2)(a) of the GST Act).

Section 40-35 of the GST Act provides that a supply of premises that is by way of lease (other than a long-term lease, as defined in section 195-1 of the GST Act) is input taxed: • if the supply is of residential premises (other than a supply of commercial residential premises), and • to the extent that the premises are to be used predominantly for residential accommodation (regardless of the term of occupation).

Pursuant to the assumptions at paragraphs 20(c) and 20(d) of this Product Ruling, the supply of the Property by the Owner to Future Rent by way of the Concurrent Lease is input-taxed in accordance with section 40-35 of the GST Act and therefore not one on which GST is payable by the Owner, nor one that gives rise to an entitlement to an input tax credit for anything acquired to make the supply.

Provided that the scheme ruled on is entered into and carried out as described in this Ruling, it is accepted that the scheme is an ordinary commercial transaction and Part IVA of the ITAA 1936 will not apply.

The following is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Class of entities 4 Superannuation Industry (Supervision) Act 1993 7 Qualifications 8 Date of effect 10 Changes in the law 12 Note to promoters and advisers 14 Ruling 15 Scheme 16 Overview 19 Assumptions 20 Appendix 1 - Explanation 21 Assessability of Concurrent Lease Rent 21 Deductibility of amounts incurred by the Owner 30 Application of the CGT provisions to the Owner 33 Grant of the Concurrent Lease 33 Assignment of Owner Rights 38 Surrender or termination of the Concurrent Lease 43 Application of GST provisions to the Owner 48 Part IVA - anti-avoidance 51 Appendix 2 - Detailed contents list 52