The first GST High Court case handed down today clarifies that GST is payable on deposits forfeited on land and property transactions but leaves the treatment of GST on forfeited deposits uncertain for other industries according to Deloitte Indirect Tax Partner Andrew Nutman.

“However, the case involving Reliance Carpets vs the Commissioner of Taxation, ultimately failed to address the treatment of deposits for GST purposes,” Mr Nutman said.

“Reliance Carpets challenged whether business should pay one 11th of any forfeited deposit to the Tax Office.”

“The Commissioner’s appeal was successful and businesses involved in identical land and property transactions will need to ensure they have accounted for GST on deposits.”

“For businesses supplying land in differing circumstances and businesses in other industries who take deposits, particularly travel, tourism and major retail goods industries, this decision unfortunately does not provide certainty as to the correct GST treatment of forfeited deposits.”

“Clearly this is an issue that will ultimately need to be further clarified in the courts.”