Private ruling: GST and supply of property by mortgagee in possession
Date of advice: 18 February 2022
Published: May 2022
Ruling period: 1 December 20XX till quarter ending 31 December 20XX
Date scheme commenced: 1 December 20XX

Ruling: Q1: Can the entity (Mortgagee in Possession) choose to apply the margin scheme under section 75-5 of the A New Tax System (Goods and Services Tax Act (GST Act) when it exercises its power and makes a supply of the Properties to the purchaser? | A1: Yes, where all of the requirements for the application of the margin scheme contained in Division 75 of the GST Act are satisfied, the Mortgagee in Possession may apply the margin scheme in respect of the sale of the Properties. Division 105 of the GST Act deals with supplies made by creditors of property belonging to a debtor, where the supply is in satisfaction of a debt owed to the creditor. The supply is a taxable supply if it would have been a taxable supply had the debtor made the supply. The creditor is liable for any GST payable on the supply of the debtor's property. Having regard for the provisions of Division 105 of the GST Act, the creditor, in this case the Mortgage in Possession, is taken to be standing in the shoes of the debtor when the Mortgage in Possession makes the supply or is acting as agent for the debtor. As a result, for the purpose of the Mortgage in Possession applying the margin scheme to the sale, the word 'you' as used in Division 75 is taken to mean the debtor. | Q2: Where the Mortgagee in Possession chooses to apply the margin scheme to the sale of the Properties, can the Commissioner confirm that the amount of GST on the taxable supply of the Properties is calculated in accordance with subsection 75-10(2) of the GST Act? | A2: The Commissioner confirms that the amount of GST on the taxable supply of the Properties is calculated in accordance with subsection 75-10(2) of the GST Act. Section 75-10 of the GST Act provides that the if the taxable supply of real property is under the margin scheme, the amount of the GST on the supply is 1/11 th of the margin for the supply. Subsection 75-10(2) of the GST Act explains that subject to subsection (3) and section 75-11, the margin for the supply is the amount by which the consideration for the supply exceed the consideration for your acquisition of the interest, unit or lease in question. In this case the consideration for the supply does not exceed the consideration for the acquisition as the Mortgagee in Possession supplies the Properties for an amount equal to what it was acquired. On this basis the margin is therefore considered to be nil.

Relevant facts and circumstances: The entity is a mortgagee in possession (a creditor). The supply of the Properties would have been a taxable supply if the debtor had made the supply. The debtor, if it had sold the Properties, could have chosen to apply the margin scheme under section 75-5 of the GST Act. The debtor has not given written notice to the entity (i.e. the Mortgagee in Possession) that the supply, had the debtor made it, would not have been a taxable supply. The Mortgagee in Possession has entered into a contract of sale with a Purchaser in respect of the Properties. The consideration under the contract of sale is the same amount as what the debtor acquired the Properties.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999