When “Nothing Was Done” But GST Still Applied: Lessons from Commissioner of Taxation v MBI Properties Pty Ltd (2014)

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Published: 19 November 2025 | Reviewed: 19 November 2025
(3-minute read)

Case Summary - what actually happened

In Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49, the High Court examined a deceptively simple question:

If a buyer acquires leased residential premises, and simply continues to honour the lease, is that a “supply” for GST purposes?

MBI had purchased three serviced-apartment lots already leased to a hotel operator (MML). The Full Court had earlier held that because MBI did nothing new, the leases simply continued by operation of law, MBI did not make any supply to the tenant.

The High Court reversed that approach.

A key passage captures the Court’s reasoning:

“There will then be at least one further supply which occurs progressively throughout the term of the lease… by means of the lessor observing and continuing to observe the covenant of quiet enjoyment.”

And more specifically:

“MBI’s assumption of that express obligation… resulted in MBI becoming obliged to continue to make the same further input-taxed supply of residential premises by way of lease to MML.”

The Court held:

• The continuing obligation to provide quiet enjoyment is itself a supply.

• That supply is input-taxed (because it is residential leasing).

• Because MBI intended to make these supplies, the increasing adjustment under s 135-5 applied.

• Rent could be “price” for this later supply even if it was also consideration for the earlier grant of the lease.

Accordingly, MBI became liable for GST under the increasing-adjustment mechanism.

Why It Still Matters - the modern risk

This case continues to be cited because it shows how obligations that “just continue” can nevertheless have tax consequences. Clients often assume that where they have not negotiated new terms, taken action, or altered the economic arrangement, no new supply exists.

The High Court rejected that premise.

In commercial settings, especially where property, management agreements, or franchising arrangements involve long-running executory obligations, the risk is mischaracterisation. A party may unintentionally:

• trigger GST liability,

• distort their input-taxed and taxable-supply proportions, or

• overlook price-attribution effects across sequential supplies.

For time-poor executives (particularly in property, hospitality and infrastructure), the danger is that a passive continuation of obligations can still be treated as a fresh supply.

How to Avoid the Same Trap -
the Clean Law protection

The risk in MBI is not cost creep, but governance failure: unclear role boundaries, unexamined ongoing obligations, and no structural guardrails to separate advice from interests.

The closest-fitting Clean Law safeguard is therefore Independence & Oversight, which includes:

• ACNC-governed transparency,

• audited trust-account governance, and

• a prohibition on referral fees and shared profits (see our Referral Policy at /referral-policy).

This safeguard is designed to reduce the systemic risks on display in MBI: situations where parties assume that obligations “carried over” without analysis retain the same tax or legal character.

Because Clean Law’s structure requires independent review and obligation-tracking across the lifespan of an enterprise or transaction, it is built to highlight where a client may unintentionally be making a supply, shifting enterprise character, or triggering downstream liability.

For executives handling complex property arrangements, a safer approach is one where governance is embedded, not left to assumptions about continuity.

Reflection

MBI demonstrates how a party can become liable simply by honouring an obligation it did not itself create. It shows why sophisticated clients benefit from structures that maintain independence, promote transparent oversight, and prevent misalignment of roles.

If this case raises questions about how ongoing obligations in your own arrangements might be characterised, our independence framework offers a deeper explanation of how structural safeguards reduce these risks.

For clients facing transactions where obligations may roll forward or compound over time, a confidential conversation often clarifies exposure. Our booking system is operated under audited governance and no referral-fee arrangements.

Book a confidential consult → Speak with a Solicitor

By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.