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ARTICLE · 03 OCTOBER 2012

GST risks for property and investment syndicates

Cooper Grace Ward
Cooper Grace Ward
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Many property and investment syndicates described as joint ventures do not qualify as joint ventures for tax or GST.

AustraliaTax
Greg Cahill
Greg Cahill
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Many property and investment syndicates are described as joint ventures but do not actually qualify as joint ventures for tax or GST purposes because of the narrow scope of the definition of joint venture in the legislation.

For tax purposes, most of these 'joint venture' structures are in fact partnerships or, in cases where a nominee holds the syndicate property, may actually constitute a separate trust estate.

If the parties do not understand what sort of 'tax entity' they have created they may trigger unexpected tax and GST outcomes. These risks have been illustrated by two recent decisions.

In Yacoub v Commissioner of Taxation, Mr and Mrs Yacoub entered into a property development 'syndicate agreement' with a third party. The parties referred to their arrangement as a 'syndicate' and there was an express clause in the document that 'no partnership shall exist between the parties'.

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