ATO ID 2004/223: GST and valuation date for calculating GST under the margin scheme
Date of decision: 29 October 2003
Business line: Indirect Tax

Issue
Can the entity, a property developer, use the date when it re-registers for goods and services tax (GST) as the valuation date under subsection 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000?

Decision
No, the entity cannot use the date when it re-registers for GST as the valuation date under subsection 75-10(3) of the GST Act when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000.

Facts
The entity is a property developer. The entity is selling a block of land that it acquired before 1 July 2000. The sale of the land is a taxable supply under section 9-5 of the GST Act. The entity meets the requirements under section 75-5 of the GST Act to apply the margin scheme to calculate the GST payable on the supply of the land and has chosen to calculate the margin based on a valuation method. The entity holds an approved valuation for the purposes of section 75-35. There were no improvements on the land or premises as at 1 July 2000. The entity is not the Commonwealth, a State or a Territory. The circumstances specified in section 75-11 of the GST Act do not apply. The entity was previously registered for GST at 1 July 2000. However, after a few tax periods the entity cancelled its registration, as its turnover was below the registration turnover threshold. The entity then re-registered for GST at a later date as its turnover had increased.

Reasons for decision
Summary: Subsection 75-10(3) of the GST Act provides that if: the margin for the supply is the amount by which the consideration for the supply exceeds that valuation. Therefore, the date when the valuation of the interest must be made will depend on which item in the table in subsection 75-10(3) of the GST Act applies. Item 1 in the table (Item 1) provides that the valuation date will be 1 July 2000, where an entity acquired its interest in real property before 1 July 2000 and item 2, item 3 and item 4 in the table (Item 2, Item 3 and Item 4) do not apply. The entity acquired its interest in the real property before 1 July 2000. As there were no improvements on the land or premises as at 1 July 2000, Item 3 does not apply. As the entity is not the Commonwealth, a State or a Territory, Item 4 does not apply. Item 2 provides that where the supplier acquired the interest unit or lease before 1 July 2000, but does not become registered or required to be registered until after 1 July 2000, the valuation date is the earlier of either the date of effect of the entity's registration or the day on which the entity applied for registration. That is, Item 2 only applies to determine the valuation date in circumstances where the supplier was not registered or required to be registered until after 1 July 2000. The entity was registered for GST on 1 July 2000. As such, Item 2 does not apply. Item 2A applies where the supplier acquired the interest, unit or lease on or after 1 July 2000. As the entity acquired the land before 1 July 2000, Item 2A does not apply. Accordingly, the entity's supply of real property satisfies the requirements of Item 1 and therefore, the valuation date to be used is 1 July 2000. Therefore, the entity cannot use the date that it re-registers for GST as the valuation date under subsection 75-10(3) of the GST Act when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 75-5 subsection 75-5(1)(A) subsection 75-5(3) subsection 75-10(3) subsection 75-10(3) table item 1 subsection 75-10(3) table item 2 subsection 75-10(3) table item 2A subsection 75-10(3) table item 3 subsection 75-10(3) table item 4 section 75-11 section 75-35
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2000/21 | Goods and Services Tax Ruling GSTR 2000/21A - Addendum | Goods and Services Tax Ruling GSTR 2000/21ER - Erratum | Goods and Services Tax Ruling GSTR 2006/7
Subject references: Goods and services tax GST property & construction GST margin scheme GST sale of real property GST registration Registration cancellation Required to be registered GST supplies & acquisitions Taxable supply