Question

Darryl Kerrigan is the director of DK Pty Ltd, which is a property investment company in Sydney and the company is registered for Goods and Services Tax (GST). Due to the COVID-19 impact, DK Pty Ltd has decided to rent out their twenty (20) existing office units that they finished in a building project in February 2020. To negotiate rental contracts, DK Pty Ltd employs a property lawyer, Mr. Dennis Denuto. Dennis is a busy lawyer and his practice income is $300,000 per year. DK Pty Ltd offered Dennis a rent-free office in the city of Sydney in exchange for his service to DK Pty Ltd. The market rental value of the office provided to Dennis is $38,000 per year. Required: Advise of the GST obligations and the input tax credit of this arrangements to DK Pty Ltd and Mr. Dennis Denuto.

Answer 1

Answer :-

1) As a general principal, value of supply will be the amount of consideration received in money from the buyer.

2) However, there can be cases when the consideration is not in money and in the kind.

3) the value of supply shall be: Open Market Value of such supply. Open Market Value will be the amount which is fairly available in open market.

4) in the given case DK Pty Ltd offered Dennis a rent-free office in the city of Sydney in exchange for his service to DK Pty Ltd. The market rental value of the office provided to Dennis is $38,000 per year.

5) so GST will be payable on fair market value of consideration that is $38000.

6) Obligation to pay GST on Mr. Dennis denuto on amount $38000.

7) And Dk pty ltd. Is able to take input tax credit of gst paid by Mr. Dennis denuto on $38000.

Thank you.