Reference no: EM13342366

Question 1:

1 Would LIP also be required to make a change of use adjustment in respect of the conversion of the RIP building into apartments, and if so,
when? If LIP is required to make a change of use adjustment, how in principle will it be calculated? What difference, if any, would it have made if LIP had acquired the building with the intention to build a rest home?

2 What difference, if any, does it make to LIP if 95% of residents select the "independence" package?

3 How should the sale of the retirement village be treated by both LIP and LIM for GST purposes? What is the consequence of LIM failing to register for GST?

4 What is the time of supply of the sale by LIP to LIM? Is it when LIP enters into a conditional agreement to sell the retirement village to LIM?

5 If LIM does formally register for GST on an invoice basis, can LIM claim an input tax deduction for marketing the village, and if so, how would it be calculated?

Question 2: Property Venture

Theo and Melanie are "new" to the property game. They are persuaded by their close friends Tarzan and Jane to enter into a joint venture with them to purchase and subdivide into four lots a block of land in Tauranga. The cost of the subdivision is minimal and involves no physical work on the land.

Following the completion of the subdivision it is envisaged that Theo and Melanie would obtain title to two of the subdivided lots and Tarzan and Jane would obtain title to the other two lots. Theo and Melanie wish to build a house on each of their lots with the view to renting them out. Tarzan and Jane have not decided what to do with their 2 lots.

Ultimately, Theo and Melanie decide to establish a trust ("Trust 1") in order to participate in the joint venture. The trustee of the Trust 1 is a company controlled by Theo and Melanie (Wall Investments Limited) and the sole beneficiary of Trust 1 is a second trust ("Trust 2"). The
beneficiaries of Trust 2 include Theo and Melanie and their children. Trust 1 and Tarzan and Jane could appoint a Custodian (a company which is owned by Trust 1 and Tarzan and Jane) to hold the land as bare trustee for the joint venture participants.

1 Are the parties carrying on a taxable activity?

2 Is the venture a joint venture or a partnership?

3 Can the venture register for GST?