Avoidance of Goods and Services Tax (GST) on the sale of new residential premises

Two or more entities, which typically include a developer and a marketer, enter into an arrangement, which they refer to as a joint venture, for the purpose of constructing and marketing residential premises. 2. The entities apply for approval as a GST joint venture. 3. The developer is nominated as the GST joint venture operator. 4. The developer owns or acquires land and engages a construction company, which may be an associate, to construct residential units/houses on the land. 5. The developer sells the units/houses to the marketer without paying GST. (Generally, sales of new residential premises are taxable supplies. However, a supply by a joint venture operator to an entity that is a participant in a GST joint venture is treated as if it were not a taxable supply). 6. The marketer subsequently sells the units/houses to third parties, and treats the sales as input taxed for GST purposes, as they are claimed to no longer be "new residential premises", having previously been sold by the developer to the marketer. 7. Notwithstanding that the sale of units/houses by the marketer to third parties is treated as being input taxed, the developer claims input tax credits on the costs of constructing the units/houses and/or the acquisition of the land. 8. The proceeds from the sale of the units/houses to third parties are distributed amongst the participants in the arrangement.