Private ruling: Sale of property
Published: December 2012
Ruling period: Not applicable in this case.
Date scheme commenced: Not applicable in this case.

Ruling: Q1: Can we apply the margin scheme in working out the amount of GST on the taxable supply of the property we intend to make? | A1: Yes, you can apply the margin scheme in working out the amount of GST on the taxable supply of the property you intend to make.

Relevant facts and circumstances: You are a company registered for the goods and services tax (GST). You are carrying on an enterprise of property development. You purchased vacant land with the intention to build a residential house for sale. The vacant land was purchased in the relevant year. You purchased the land from an entity which was a partnership of entities consisting of several individuals and a company. Neither the partnership, nor the individuals nor the company were registered or required to be registered for the GST. Consequently, the vacant land was not supplied to you as a taxable supply and therefore you did not claim any input tax credit on the acquisition. You are currently constructing a residential house on the land and wish to sell the property under the margin scheme. You have verified that the proposed supply is not ineligible for the margin scheme under any of the exclusions listed under subsection 75-5(3) of the A New tax System (Goods and Services Tax) Act 1999 (GST Act). You will enter into a written agreement to apply the margin scheme to the sale with the prospective buyer on or before the sale takes place.

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

Reasons for decision: Summary: Under section 75-5 of the GST Act you may apply the margin scheme in working out the GST on a taxable supply of real property you make by selling a freehold interest in land if you and the recipient of the supply have agreed in writing that the margin scheme is to apply to the sale. However, subsection 75-5(3) of the GST Act states that a supply is ineligible for the margin scheme if any of the items listed under this subsection apply to the supply you intend to make. In this case you intend to make a taxable supply of real property by selling a freehold interest in land and will enter into a written agreement to apply the margin scheme on or before the date of the supply. You further state that the proposed supply is not ineligible for the margin scheme on the basis that none of the exclusions listed in subsection 75-5(3) of the GST Act apply to the proposed sale. In your submission to us you advise that the property was sold to you by several individuals and a company and that none of these entities together or individually were registered or were required to be registered for the GST at the time the sale took place. In such a situation, the supply of the property would not be a taxable supply to you. The onus, therefore, is on you to ensure that information you supplied to us is correct. You explicitly stated that you have examined subsection 75-5(3) of the GST Act and confirmed that the supply you intend to make is not ineligible for the margin scheme. You can, therefore, apply the margin scheme to the supply of the property you intend to make.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.