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Out of Court Settlements may be subject to GST |
The Australian Tax Office has issued a Tax Ruling on the Goods and Services Tax consequences resulting from court orders in out of court settlements (GST 2001/4). The Ruling is fairly complex. It explains the circumstances in which, because there is a link or nexus between the payment (or act of forbearance) and a supply, the payment represents consideration for a supply. For example, if the Court settlement involves payment relating to litigation concerning a taxable supply subject to GST then the settlement may be subject to GST. The Ruling also considers the GST treatment of an award of costs or a negotiated costs amount. It goes without saying that this complexity means you need good legal and tax advice before signing any settlement agreement. |
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