"Owners, tenants stuck in GST mire"

    A Federal Court decision on the payment of the GST on commercial rents has crated widespread confusion among landlords and tenants.
    The decision, MBI Properties v the Commissioner of Taxation, was handed down last month.
    The full Federal Court unanimously found that the purchaser of a residential property subject to an existing lease did not have to pay GST n the rental income after the purchase.
     The argument was that the "supply" on which the GST was based had been made by the previous owner, so the new owner was not liable.
    The GST partner at DLA Piper Australia, Matthew Cridland, said the decision was contrary to current practice and existing rulings from the Australian Taxation Office.
    Proper to the decision, the purchaser of such a property automatically became the lessor and GST taxpayer.
    Mr Cridland said that although the case concerned a residential lease, the decision could have significant implications for purchasers of non-residential premises sch as offices, warehouses, and retail properties after the property has changed hands.
    For landlords the decision raises several questions.
    Should incoming owners continue to forward to the ATO the GST on leases, and outgoings, entered into by the former owner? Or, in a situation one lawyer described as "absurd", might past owners continue to be liable for those payments?
    And can owners continue to sell leased premises as "going concern"?
    The questions have a sharp focus because owners need to complete their latest GST returns by November 21.
    For tenants, the key questions are whether they should continue to pay GST on rent and outgoings and whether they are due money back for past GST payments.
    The issues raise the potential for many disputes between landlords and tenants and for a many refund claims to the ATO for past GST payments.
    A spokesman for the Property Council said the group was "working with government to resolve the confusion quickly and bring back certainty to the industry".
    Mr Cridland said the ATO had until November 15 to appeal the decision to the High Court.

This article was sourced from The Australian Financial Review and was written by Robert Harley.