Clarifying the application of the “concurrent use of land” provision

(Clause 146)

Summary of proposed amendment

An amendment is being made to clarify the application of the “concurrent use of land” provision in section 21E of the Goods and Services Tax Act 1985. The proposed change provides that “concurrent” means the same part of the land is simultaneously (“concurrently”) used for both taxable and non-taxable purposes.

Application date

The amendment will apply from the date of enactment.

Key features

Section 21E of the GST Act provides a formula that must be used to apportion the taxable and non-taxable use of land in situations when the mixed use occurs “concurrently”. The provision was intended to apply when the same area of land is equally and simultaneously is used for both taxable and non-taxable purposes.

The wording of the provision is being amended to ensure that it applies as intended.

Background

Section 21E of the GST Act provides guidance when a person rents out land (exempt use) or uses land for private purposes while simultaneously using it for making taxable supplies, such as taking steps to sell it. This type of mixed use is most likely to affect property developers.

The provision is not intended to apply when land is used for both taxable and non-taxable purposes, but that use either relates to different parts of the land or is not simultaneous. Concerns have been raised, however, that the provision as currently drafted may be interpreted too broadly and may, in some situations, produce unintended results.