GST & Real Property Leases – Implications Of The MBI Case

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The Full Federal Court recently handed down its decision in MBI Properties Pty Limited v Commissioner of Taxation [2013] FCAFC 112 ("MBI Case").

The decision supports the view that neither the vendor or purchaser of a tenanted property (a reversionary interest) makes a new or continuing supply to the tenant following the sale of the property. This may have significant GST implications in relation to both tenanted residential premises (the lease of which is input taxed) and tenanted commercial premises (the lease of which is generally a taxable supply and subject to GST).

DECISION SUMMARY -

The case was concerned with whether MBI Properties Pty Ltd ("MBI") had an "increasing adjustment" under Division 135 of the A New Tax System (Goods and Services Tax) Act 1999 ("GST Act"). The adjustment potentially arose as a consequence of MBI having purchased three tenanted residential apartments on a GST–free basis as the supply of a "going concern".

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