Private ruling: Request for refund of GST

Ruling: Q1: Are you entitled to a refund of overpaid GST on your sale of the properties due to an error from your accountant in applying the margin scheme? | A1: You are entitled to a refund of the GST payable on the sale of the properties.

Relevant facts and circumstances: You are registered for the Goods and Services Tax (GST). You have operated for many years as a spec home builder. You recently conducted a review of your property sales as you believe there were cases where you were entitled to use the margin scheme to calculate the amount of GST, but you failed to do so due to an error from your accountant. You discovered some cases where this occurred, which you believe lead to an overpayment of GST. You have supplied copies of the relevant sale and purchase contracts. Each sale contract contains a statement: to the affect that the margin scheme was to be used.


Reasons for decision: Summary: The margin scheme is an alternative method of calculating the amount of GST payable on supplies of freehold interests in land, stratum units or long term leases. The conditions for the use of the margin scheme are set out in Division 75 of the A new tax system (Goods and Services Tax) Act 1999 (GST Act). Among other things, section 75-5 of the GST Act provides that an entity can use the margin scheme if the entity and the recipient of the supply have agreed in writing that the margin scheme is to apply to the sale of the property. You will not be able to use the margin scheme if you are selling real property that you: · acquired through a taxable sale on which the margin scheme was not used; · inherited from a person who would not have been able to use the margin scheme; · acquired from a member of the same GST group who would not have been able to use the margin scheme; or · as a participant in a GST joint venture, acquired from the joint venture operator who would not have been able to use the margin scheme. In this instance there is no evidence that suggests that any arrangement exists that would have the effect of producing an outcome contrary to the policy of the legislation. Furthermore the copies of the sale contracts show that it was clearly the intention of all parties to use the margin scheme in connection with the sale of the properties. You were therefore eligible to use the margin scheme when you sold the properties. The fact that you did not use the margin scheme was due to an error by your accountant. In order to rectify this error, and obtain a refund of the overpaid GST, you will need to lodge amended BASs for the relevant tax periods. You advised that your accountant treated those supplies as taxable. In the event you have issued tax invoices to the recipients and those recipients are registered for GST they may have claimed input taxed credits. Where this is the case you cannot use the margin scheme.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.