Sometimes a property development can be undertaken by two (or more) different parties (related or unrelated) who may undertake different roles. Such parties often come together in the form of a ‘joint venture’ (‘JV’). One of the main advantages of undertaking a development in the form of a JV is that it avoids the risk of exposure associated with joint and several liability that attaches to partners in a partnership.
A JV can operate as an incorporated joint venture (e.g., where the development is undertaken in a company structure which is jointly owned by the joint venturers), or as an unincorporated joint venture, sometimes referred to as a ‘non-entity’ JV (e.g., a trust and an individual may jointly undertake the development without creating a new entity).
An unincorporated JV is generally not recognised as an entity for tax or GST purposes. That is, each party involved in the joint venture individually accounts for the tax and GST treatment that applies to their transactions. However, for GST purposes, where the joint venturers satisfy the requirements in Subdivision 51-A of the GST Act, they can register the JV for GST. In this case, the nominated JV operator then accounts for the GST arising from the JV’s dealings. A JV can only register as a GST JV for a purpose specified in the GST Act or regulations. One such purpose is the “building…of residential or commercial premises”. Refer to GST Regulation 51-5.01(1)(f).
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