Private ruling: GST and the margin scheme
Date of advice: 2 July 2019
Published: September 2019

Ruling: Q1: Will Entity A (You) be able to use the margin scheme in accordance with Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to work out the amount of GST payable in respect of the taxable supply of the newly constructed house? | A1: Yes.

Relevant facts and circumstances: · Entity A (You) is currently registered for the goods and services tax (GST). · You purchased vacant land (property) from Entity B (vendor), for the specified purchase price. · The vendor was not registered or required to be registered for GST at settlement. · You bought the property with the intention to subdivide the land and construct residential houses on the land, for sale. · Your supply of the newly constructed residential houses will be a taxable supply. · You plan to sell the completed residential houses under the margin scheme. · You and the purchaser will agree in writing that the margin scheme is to apply to the sale of the new residential houses. This written agreement will be made on or before settlement. · You were not a member of a GST group or participant to a joint venture. · The vendor that you acquired the property from was not your associate.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(3) | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: You make a taxable supply if you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is *connected with indirect tax zone; and (d) You are *registered or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Denotes a term defined in section 195-1 of the GST Act) Under subsection 75-5(1) of the GST Act, the margin scheme applies in working out the amount of GST on a taxable supply of real property that a supplier makes if the supplier and recipient of the supply have agreed in writing that the margin scheme is to apply to the supply. The agreement must be made on or before the making of the supply, or within such further period as the Commissioner allows. However subsection 75-5(2) of the GST Act provides that the margin scheme does not apply if the entity acquired the entire freehold interest, unit or long term lease through a supply that was ineligible for the margin scheme. Subsection 75-5(3) of the GST Act lists the circumstances where a supply is ineligible for the margin scheme. On the facts provided, you did not acquire the property through a supply that was ineligible for the margin scheme, as set out in section 75-5(3) of the GST Act. You are eligible to use the margin scheme. The sale of the newly constructed house and land is a taxable supply. On or before settlement, you and the purchaser will enter into a written agreement that the margin scheme is to apply to the sale. Therefore, you will be able to apply the margin scheme in working out the amount of GST on the taxable supply that you make.