Private ruling: GST and the margin scheme
Date of advice: 23 March 2020
Published: April 2020
Ruling period: 1 August 2019 till quarter ending 30 June 2021
Date scheme commenced: 1 August 2019

Ruling: Q1: Is Entity X (Vendor) and the Purchaser eligible to use the margin scheme for the sale of new residential premises (the New Property)? | A1: Yes As the supply of the New Property is not an ineligible supply under subsection 75-5(3) of the GST Act, and the Vendor and Purchaser have made an agreement in writing that the margin scheme is to apply, the requirements for applying the margin scheme under section 75-5 of the GST Act have been met.

Relevant facts and circumstances: Entity X is registered for GST with effect from 1 September 2015. After 1 July 2000 Entity A (the Previous Vendors) and Entity X (as purchaser) entered into a contract of sale for land (First Contract) for a property which consisted of residential premises. Pursuant to the terms of the First Contract, the sale was not a taxable supply as it is input taxed residential premises. Accordingly the acquisition by Entity X did not include GST. Entity X subsequently developed the Property by demolishing the existing residential premises, subdividing the land and constructing new residential premises on each lot. The sale of each new residential premise constructed will meet the requirements of a taxable supply for the purposes of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Subsequently Entity X (as Vendor) and Entity B (as Purchaser) have entered into a contract of sale of land (Second Contract) for the sale of one of the new residential premises (Developed Property). Pursuant to the terms of the Second Contract the Vendor and the Purchaser have agreed that the margin scheme is to apply to the sale of the new residential premises.

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