Technically, such an arrangement may not even be a ‘joint venture’ as such, especially if the participants are not sharing in the output of the development – it would simply be the supply of services in return for consideration. Note that this could even be the case where the builder is ‘paid’ by receiving title to one of the units that has been built. Refer paragraph 43 of GSTR 2004/2.
This type of arrangement also means the landowner will usually sell the units, as title will remain in their name at all times. This avoids triggering a potential income tax, GST or stamp duty liability that may otherwise arise if any part of the land were to be transferred into the builder’s name prior to their ultimate sale. It is important that each party obtains appropriate advice and that the terms of the agreement are documented.
In particular, the landowner will want to ensure the profit they obtain and the building fee they pay is commercial, and the builder will want to ensure that they have appropriate safeguards to ensure they are paid for the building services they provide when the lots/units are eventually sold.
If the sale of any property under such an agreement will not be recognised purely on capital account by the landowner, then the building and construction fee paid to the builder will either be included in the overall costs of the development when calculating the net profit of a profit-making scheme (if they are not carrying on a business of property development), or as part of the cost of the landowner’s trading stock (if they are carrying on a business).
However, since the land never becomes the builder’s trading stock, they will be able to claim deductions for building and construction costs as they are incurred without the need to ‘add them back’ as part of stock on hand. Also, the builder will only need to recognise income from the project when it becomes entitled to bill for the work it has done (which will be determined by the agreement and may only be when certain milestones are reached). Depending on the agreement, this may occur only when the properties are sold. Refer to Henderson v FCT  HCA 62, Barratt v FCT  FCA 271, Grollo Nominees Pty Ltd v FCT  FCA 659, and TR 2018/3.
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