Private ruling: Sale of property
Published: March 2014

Ruling: Q1: Is the valuation you provided to us appropriate and correct for use in the calculation of the GST under the margin scheme? | A1: See below

Relevant facts and circumstances: • You are a company which is in liquidation and managers and receivers have been appointed. • You own vacant land (hereinafter referred to as the Property). • You purchased this Property before 1 July 2000 and held it since then. • As part of the liquidation process you have sold the Property to a purchaser (hereinafter referred to as the Purchaser) in 20XX under the margin scheme. • Both you and the Purchaser are registered for the goods and services tax (GST). • The supply of the Property is not ineligible for the margin scheme under subsection 75-5(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). • The Purchaser obtained a valuation of the Property as at 1 July 2000 and provided a copy of the valuation report to the Australian Taxation Office (ATO). • The valuation was carried out by a "Certified Practicing Valuer". • The valuer provided you with a valuation for the property as at 1 July 2000.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 75-35. A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2009/1 (MSV 2009/1) | Taxation Administration Act 1953 (TAA) section 359-40 | Taxation Administration Act 1953 (TAA) section 155-5

Reasons for decision: Summary: Section 75-35 of the GST Act states that: (1) The Commissioner may, by legislative instrument, determine in writing requirements for making valuations for the purpose of this Division. (2) A valuation made in accordance with those requirements is an approved valuation . The Commissioner has made a determination, A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2009/1 (MSV 2009/1), specifying the requirements for the purpose of applying the margin scheme under Division 75 of the GST Act for supplies of real property made on or after 1 March 2010. In this case the property was supplied in 20XX. Paragraph 11 of MSV 2009/1 states: A valuation of the interest, unit or lease made in accordance with the requirements set out by the Commissioner in this determination is an approved valuation of that interest, unit or lease. The requirements set out by the Commissioner for an approved valuation are given under four methods. Of these, the appropriate method for you to use is Method 1 or 2. Where a valuation is by a professional valuer, the Method 1 given in MSV 2009/1 should be followed. The requirements under Method 1 of MSV 2009/1, relevant to this case, are as follows: (1) the valuer must be a * professional valuer ; (2) the valuation must be in writing; (3) the valuation must determine the market value of the interest, unit or lease at the valuation date; (4) the valuation must be made in a manner that is not contrary to the professional standards recognised in Australia for the making of real property valuations; (5) the valuation must include a signed certificate which specifies: (a) a full description of the property being valued; (b) the applicable valuation date; (c) the date the valuer provides the valuation to the supplier; (d) the market value of the property at the valuation date; (e) the valuation approach and the valuation calculation; and (f) the name and qualifications of the valuer; The term 'professional valuer' is defined in paragraph 24 of MSV 2009/1 as: (1) a person registered or licensed to carry out real property valuations under a Commonwealth, a State or a Territory law; or (2) a person who carries on a business as a valuer in a State or a Territory where that person is not required to be licensed or registered to carry on a business as a valuer, or (3) a person who is: (a) a member of the Australian Property Institute and accredited as a Certified Practicing Valuer; or (b) a member of the Royal Institution of Chartered Surveyors and accredited as a Chartered Valuation Surveyor; or (c) a member of the Australian Valuers Institute and accredited as a Certified Practicing Valuer. In this case you have provided a 'Valuation Report' for us to assess its appropriateness and correctness for using in calculating your GST liability under the margin scheme. To do such assessment, it is necessary for the Commissioner to establish that the valuation was made in a manner not contrary to the professional standards recognised in Australia for the making of real property valuations (see item 4 in Method 1 in MSV 2009/1 above). Such verification can only be made by another valuer. In this regard we refer you to section 359-40 of the Taxation Administration Act 1953 (TAA) which states: (1) If making a *private ruling would require determining the value of anything, the Commissioner may: (a) refer the valuation to a valuer; or (b) refer a valuation provided by the applicant to a valuer for review. Note: The Commissioner may request further information: see section 357-105. (2) If the Commissioner refers the valuation to a valuer, the Commissioner must tell the applicant that he or she has done so. (3) When the valuer has completed its work in relation to the valuation, the Commissioner must tell the applicant that it has done so. Note: The Commissioner should make a private ruling within 60 days. However, if the Commissioner refers a valuation to a valuer under this section, that period is extended: see subsection 359-50(2). (4) The Commissioner may charge the applicant an amount in accordance with the regulations for the valuer making or reviewing the valuation. (5) This section does not apply to a valuation of a gift or contribution for the purposes of Division 30 of the Income Tax Assessment Act 1997 . For the Commissioner to assess the correctness of the valuation you submitted, the Commissioner has to refer the valuation to a valuer for review. The cost of this may have to be charged to you as stated in section 359-40 of the TAA. We do not consider that your application for a private ruling was a request to the Commissioner to undertake a review of the valuation submitted as per section 359-40 of the TAA. We also wish to advise you that indirect taxes (such as GST) comes under a self-assessment regime. If you calculated your GST liability based on a valuation prepared in accordance with the advice given in MSV 2009/1, it would be considered as a self-assessment. Nevertheless, under subsection 155-5(1) of the TAA, the Commissioner may, at any time, make an assessment of an assessable amount. You may refer to guidelines on self-assessment provided on our website. You can access the relevant section via the following link: http://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/General-guides/Guide-to-self-assessment-for-indirect-taxes/