Private ruling: Application of margin scheme
Published: August 2012

Ruling: Q1: Can you use the margin scheme to calculate the GST payable on the sale of an aircraft hangar? | A1: No, the margin scheme cannot be used to calculate the GST payable on the sale of an aircraft hangar.

Relevant facts and circumstances: · You purchased an aircraft hangar in 19XX. · The hangar was sold in 20YY for an amount greater than the purchase price. · You have been registered for the goods and services tax (GST) since 1 July 20ZZ. · You have purchased the hangar but not the land on which the hangar is located. · The land was supplied by way of a lease.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) - Section 75-5.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Goods and services tax, in most cases, is calculated as 1/11th of the consideration payable for a taxable supply of goods or services. Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides an alternative way of calculating GST. Under Division 75 GST is calculated as 1/11th of the 'margin' for the supply. This is referred to as the 'margin scheme'. Section 75-5 of the GST Act states: The *margin scheme applies in working out the amount of GST on a *taxable supply of *real property that you make by: (a) selling a freehold interest in land; or (b) selling a *stratum unit; or (c) granting or selling a *long term lease. *these terms are defined in section 195-1 of the GST Act. In this case you have sold an aircraft hangar, which is not the sale of a freehold interest in land; nor a sale of a stratum unit. The land to which the hangar was attached was supplied by way of a lease. The term 'long tern lease' is defined in section 195-5 of the GST Act as follows; Long-term lease means a supply by way of lease, hire or licence (including a renewal or extension of lease, hire or licence) for at least 50 years As the lease of the land is for a period of less than 50 years, it is not a 'long term lease', as defined in section 195-1 of the GST Act. As you do not meet any of the requirements of section 75-5 of the GST Act you are not eligible to use the margin scheme on the sale of the hangar. | Detailed Reasoning - Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) - Section 75-5.

Reasons for decision: These reasons for decision accompany the Notice of private ruling for The Trustee for the X Family Trust