DISPOSITION
24 For the reasons set out below, we agree with the conclusions of the primary judge in relation to ground one. Ground two does not arise.
25 The construction contended for by the Commissioner is inconsistent with the structure of the GST Act and the statutory language.
26 Characterising a supply as a single supply or multiple supplies under s 9-5 does not determine the calculation of the amount of GST payable, whether that calculation is to be determined for the purposes of s 9-70 or Div 75. The amount of GST payable is to be calculated by applying the terms of Sub‑div 9-C or, if the supply is a taxable supply of real property, the terms of the special rules in Div 75.
27 Pursuant to Sub‑div 9-C, where a supply is a supply of several matters having different characters for GST purposes (taxable, GST-free or input-taxed), GST is to be calculated having regard to the character of the different parts of the supply: s 9-80. As the Full Court recognised in Federal Commissioner of Taxation v Luxottica Retail Australia Pty Ltd [2011] FCAFC 20; (2011) 191 FCR 561 at 566 [15] (Ryan, Stone and Jagot JJ), in providing for the valuation of an actual supply that is "partly a taxable supply" and "partly a supply that is GST-free", s 9-80 recognises that a single supply may be comprised of components that are classified differently for GST purposes. The Full Court also agreed at 571-2 [43] with the following comment made by the Administrative Appeals Tribunal at first instance in that case:
Ultimately, though, we do not think that this question as to whether there is one supply or two is particularly critical to the resolution of the issue before us. It would be a surprising, and perhaps a capricious, outcome if the GST payable on a transaction were to turn on such an esoteric enquiry. And so, although we prefer the view that there is one supply, and that as a result s 9-80 is the relevant valuation provision, we agree with the parties that the same result would be reached on the alternative scenario involving two supplies, and valuation under s 9-75.
28 Section 75-5(1) applies to work out the amount of GST on "a taxable supply of real property" where, relevantly, the taxable supply takes the form of a sale of a freehold interest in land: s 75‑5(1)(a). The Commissioner's contention focusses on the word "supply", whereas the concept employed in s 75-5(1) is a "taxable supply of real property". The gateway to Div 75 is a taxable supply of real property. Once a taxable supply of real property has been identified, there is no further need to embark on an inquiry as to whether that supply is a component of another supply by recourse to s 9-10.
29 For the purposes of applying the special rules in Div 75, the terms of s 75-5(1)(a) define the subject-matter of the relevant supply as real property that is in the form of "a freehold interest in land". The subject-matter of the margin scheme in Div 75 is relevantly the sale of a particular freehold interest in land.
30 The terms of s 75-10 direct attention to the individual freehold interest. Section 75-10 applies to the calculation of GST payable for the supply of the particular legal interest by reference to the "margin for the supply": s 75-10(1). The margin for the supply is calculated by reference to "the interest, unit or lease in question": s 75-10(2). The interest, unit or lease in s 75-10(2) is a reference back to the different forms of "real property" in s 75-5(1)(a), (b) and (c), being the juridical concept or intangible legal interest specified in each of those paragraphs: Sterling Guardian Pty Ltd v Commissioner of Taxation [2006] FCAFC 12; (2006) 149 FCR 255 at 260 [21] (Heerey, Dowsett and Conti JJ). The reference to "the interest, unit or lease" appears again in item 4 of the table in s 75-10(3). It, too, is a reference back to the legal interest specified in each of the paragraphs of s 75-5(1).
31 Where there is a supply of more than one interest, s 75-10, by its terms, applies to each interest.
32 This interpretation is consistent with other provisions in Div 75 which apply where there is a lack of identity between the interest supplied by the supplier and the interest that had been acquired by that supplier. Those sections are drafted by reference to the supply of the particular freehold interest. It would be a distortion of the language of the provisions as a whole to read the singular as encompassing the plural. In particular:
(a) Section 75-16 applies if there is a taxable supply of real property under the margin scheme and "the interest, unit or lease in question" is one acquired through two or more acquisitions: s 75-16(1)(b). By referring to the "interest in question", s 75-16 is addressing the particular freehold interest the subject of the supply. Section 75‑16 enables the margin scheme to be applied where an interest that is supplied as a single interest may have been acquired through more than one acquisition, where the single interest is the result of a consolidation or amalgamation of multiple titles that had been acquired separately.
(b) Section 75-22 provides an "increasing adjustment" where there is a "taxable supply of real property under the margin scheme" and an acquisition was made of "part of the interest, unit or lease in question" through a supply that was not eligible for the margin scheme. Like s 75-16, the section recognises that a particular freehold interest supplied (being "the interest in question") may have been acquired in different parts. This will be the case where the single interest supplied was the result of a consolidation or amalgamation of multiple titles that had been acquired separately. So much is consistent with the Explanatory Memorandum to the Tax Laws Amendment (2008 Measures No. 5) Bill 2008 (Cth) at [1.50], extracted at PJ [200].
33 The Commissioner's contention ultimately depends upon whether the reference to "a freehold interest" in s 75-10 encompasses the plural as well as the singular. In this respect, he makes reference to s 23(b) of the Acts Interpretation Act 1901 (Cth) (Interpretation Act).
34 Section 23(b) of the Interpretation Act applies "subject to any contrary intention": see s 2(2). Having regard to the structure and language of Div 75 and the language of s 75-10 (with its focus on "the interest, unit or lease in question"), we do not consider that the singular "interest" in s 75‑10 includes a reference to the plural. We agree with the primary judge's conclusion (at PJ [196]) that the reference to "the interest" in each of the items in the table is a reference to the particular freehold interest referred to in s 75-5(1)(a).
35 This interpretation gives effect to the concession provided for supplies of freehold interests by the Commonwealth, a State or a Territory. The concession was described in the Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 (Cth) at [6.108] in the following terms:
Where the Commonwealth, a State or a Territory holds unimproved land at 1 July 2000 that is subsequently improved, it is able to be sold under the margin scheme. In this case, GST will be charged on the difference between the sale price and the value of the unimproved land at the date of sale - Item 4 of subsection 75‑10(3).The effect is that the value of the land is not subject to GST (that is, it is consistent with subdivision 38‑L which provides that the sale of unimproved land held by an Australian government agency will be GST-free).
This interpretation ensures that the application of the concession is unaffected by the form of the contract of sale by ensuring that GST is not payable on the value of a freehold interest held unimproved by an Australian government agency prior to 1 July 2000, notwithstanding that it is sold together with an interest also held prior to 1 July 2000 but which had been improved in the most minor way prior to 1 July 2000 (by, for example, the addition of a gate or fence).
36 This construction also gives a harmonious operation to the GST Act. The interpretation results in an approach to the calculation of GST under Div 75 that is consistent with the approach to the calculation of GST under Sub‑div 9-C, which recognises that different GST treatment may be accorded to different supplies that may form part of a single broader supply as defined under s 9-10. As set out above, pursuant to s 38-445, a supply by the Commonwealth, a State or a Territory of a freehold interest on which there are no improvements is GST-free. By operation of s 9-80, where the Commonwealth, a State or a Territory supplies a freehold interest that has no improvements on it together with a freehold interest on which there are improvements, no GST is payable on that proportion of the value that represents the value of the freehold interest on which there are no improvements. The GST treatment of the unimproved freehold does not depend upon the unimproved freehold constituting a single supply under s 9-10. A construction which applies item 4 of the table in s 75-10(3) to the individual freehold interest ensures s 75‑10(3) operates consistently with s 38-445.
37 This interpretation ensures that the amount of GST payable is not dependent on "an esoteric enquiry" as to whether there is one supply or two supplies or, in this case, four supplies, concordant with the approach endorsed by the Full Court in Luxottica 191 FCR at 571-2 [43].
38 The Commissioner's complaint that the interpretation results in undue complexity because of a need to apportion an undissected purchase price over the four freehold interests is not accepted. As the decision in Luxottica 191 FCR 561 demonstrates, it is necessary to ascertain the value of a taxable supply in order to calculate the GST payable in respect of that supply. Where a supply is a "bundled supply of taxable and non-taxable supplies" (Luxottica 191 FCR at 566-7 [19]), issues of apportionment and valuation will inevitably arise (at 570-1 [37]-[42]). That a construction of the GST Act may give rise to issues of apportionment and valuation is hardly antithetical to the operation of the Act.
39 The interpretation adopted by the primary judge avoids uncertainty, regardless of whether a particular freehold interest is sold separately or in conjunction with other interests. Most importantly, it gives effect to the statutory language. The appeal must be dismissed, with costs.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Wigney, Moshinsky and Hespe.