Private ruling: GST - property
Date of advice: 13 April 2026
Published: 29 June 2026
Ruling period: XX XXX XXXX to XX XXX XXXX
Date scheme commenced: XX XXX XXXX

Ruling: Q1: Is the Seller eligible to use the margin scheme cost base of $XXX, for the future supply of the apartments developed on the amalgamated properties situated at Property 1 and Property 2 pursuant to Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), being the sum of the following: a) $XXX for Property 1, and b) $XXX (as outlined in the margin scheme valuation provided) for Property 2? | A1: Yes, the margin scheme cost base will be the following: a) $XXX for Property 1 (provided it was the purchase price of Property 1), and b) $XXX (provided it meets the requirements of an approved valuation as at XX XXX XXXX XX XXX XXXX) for Property 2. When Property 1 and Property 2 are amalgamated and redeveloped, the Purchaser must use section 75-22 to allocate these separate cost bases to the final supplies of the developed apartments on a reasonable basis


Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 75-5 | A New Tax System (Goods and Services Tax) Act 1999 section75-11 | A New Tax System (Goods and Services Tax) Act 1999 section75-22 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: Yes, the margin scheme cost base will be the following: • $XXX for Property 1, and • $XXX (provided it meets the requirements of an approved valuation as at XX XXX XXXX) for Property 2. When Property 1 and Property 2 are amalgamated and redeveloped, the Purchaser must use section 75-22 to allocate these separate cost bases to the final supplies of the developed apartments on a reasonable basis. | Detailed Reasoning - Detailed reasoning: In this ruling, • unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act. • all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au Subsection 75-5(1) provides that an entity may apply the margin scheme on a taxable supply of real property, if the entity and the recipient have agreed in writing that the margin scheme is to apply. However, under subsection 75-5(2), the margin scheme does not apply if the entire real property was acquired through a supply that was 'ineligible for the margin scheme'. | Detailed Reasoning - Eligibility: Subsection 75-5(3) sets out circumstances in which a supply would be 'ineligible for the margin scheme'. Relevantly, it provides that: (3) A supply is ineligible for the margin scheme if: (a) it is a taxable supply on which the GST was worked out without applying the margin scheme; or ... (e) it is a supply in relation to which all of the following apply: (i) you acquired the interest, unit or lease from an entity as, or as part of, as part of, a supply of a going concern to you that was GST-free under Subdivision 38-J; (ii) the entity was registered or required to be registered, at the time of the acquisition; (iii) the entity had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme; or... In this case, the Purchaser acquired Property 1 and Property 2 from the Seller as a GST-free supply of a going concern. The Seller acquired: • Property 1 as a taxable supply without the application of the margin scheme in XXXX, and • Property 2 in XXXX and held by the Seller as at XX XXX XXXX. On the facts provided, the Purchaser is not ineligible to apply the margin scheme to the taxable supplies of the newly constructed apartments on the amalgamated property formed from Property 1 and Property 2. Acquiring the Properties as a GST-free going concern does not exclude the use of the margin scheme. Instead, Division 75 requires that the acquisition amount be determined by reference to the Seller's acquisition history, using the consideration or valuation rules in section 75-10 and 75-11. | Detailed Reasoning - Application of the margin scheme to your circumstances: Subsection 75-10(1) provides that if the margin scheme applies to the taxable supply of real property, the amount of GST on the supply is 1/11 of the margin for the supply. The 'margin' is defined in subsection 75-10(2) as: (2) Subject to subsection (3) and section 75-11, the margin for the supply is the amount by which the consideration for the supply exceeds the consideration for your acquisition of the interest, unit or lease in question. Subsection 75-10(3) provides guidance on the available valuation methods to be used in special cases. Section 75-11 provides circumstances where the margin for real property would apply. Relevantly, subsection 75-11(5) provides for margin for supply of real property acquired as a GST-free going concern. If the requirements in subsection 75-11(5) are satisfied, the margin will be calculated as follows: If the requirements in subsection 75-11(5) are satisfied, the margin will be calculated as follows: (5) If: (a) you acquired the interest, unit or lease in question from an entity as, or as part of: (i) a supply of a going concern to you that was GST-free under Subdivision 38-J; or (ii) ... and (b) the entity was registered or required to be registered, at the time of the acquisition; and (c) none of subsections (1) to (4) applies; the margin for the supply you make is the amount by which the consideration for the supply exceeds: (d) if that entity had acquired the interest, unit or lease before 1 July 2000 and on that day was registered of required to be registered: (i) if you choose to apply an approved valuation to work out the margin for the supply - an approved valuation of the interest, unit or lease as at 1 July 2000; or (ii) ... (e) if that entity had acquired the interest, unit or lease on or after 1 July 2000 and had been registered or required to be registered at the time of the acquisition: (i) if the entity's acquisition was for consideration and you choose to apply an approved valuation to work out the margin for the supply - an approved valuation of the interest, unit or lease as at the day on which the entity had acquired it; or (ii) if the entity's acquisition was for consideration and subparagraph (i) does not apply - that consideration; or ... In this case, the requirements in paragraphs 75-11(5)(a) to (c) are satisfied. the Purchaser acquired their interests in Property 1 and Property 2 as supplies of going concern from the Seller, who was registered for GST at the time of the acquisition. In addition, none of subsections 75-11(1) to (4) apply to your circumstances. For Property 1, the interest was acquired by the Seller in XXXX as a taxable supply and is ineligible for the margin scheme on its own. The purchase price when the Seller acquired the XXXX would be used under paragraph 75-11(5)(e) (i). For Property 2, the interest was acquired by the Seller in XXXX, the margin can be determined under paragraph 75-11(5)(d)(i). This means that you can choose to apply an approved valuation of Property 2 as at XX XXX XXXX. Accordingly, the cost base to be used for the margin scheme when the apartments developed on the Properties are sold by the Purchaser name would be the following: • $XXX, for Property 1, and • $XXX (provided it meets the requirements of an approved valuation as at XX XXX XXXX) for Property 2. | Detailed Reasoning - Increasing adjustment considerations: Entities can use the margin scheme on the supply of amalgamated real property where some (but not all) of the property has been purchased as a taxable supply calculated under the basic rules (i.e. not under the margin scheme). However, if an entity chooses to use the margin scheme on such sales it will have an increasing adjustment under section 75-22 to recover any input tax credits that have been claimed. This adjustment is equal to the previously attributed input tax credit amount. Specifically, if the acquisition of the interest was through a GST free going concern, it provides: (4) You have an increasing adjustment if: (a) you make a taxable supply of real property under the margin scheme; and (b) the acquisition that you made of the interest, unit or lease in question: (i) was made through a supply that was GST - free under Subdivision 38 - J or Subdivision 38 - O; or ... (c) the entity from whom you acquired the interest, unit or lease: (i) acquired part of the interest, unit or lease through a supply that would have been ineligible for the margin scheme if it had been a supply of the whole of the interest, unit or lease; and (ii) had been entitled to an input tax credit for its acquisition; and (iii) was registered or required to be registered, at the time of your acquisition of the interest, unit or lease. (5) The amount of the increasing adjustment under subsection (3) or (4) is an amount equal to 1 / 11 of: (a) if you choose to apply an approved valuation to work out the amount--an approved valuation of the part of the interest, unit or lease referred to in paragraph (3)(b) or subparagraph (4)(c)(i) as at the day on which the entity had acquired it; or (b) otherwise--the consideration for the entity's acquisition of that part of the interest, unit or lease. When the Properties are amalgamated and redeveloped, the Purchaser must use section 75-22 to allocate the separate cost bases to the final supplies of the developed apartments on a reasonable basis. | Detailed Reasoning - Other matters to consider: A Valuation Report prepared by X on XX XXX XXXX, was provided with your ruling application. This report expresses the view that the market value of the property situated at <address> as at XX XXX XXXX was $XXX exclusive of GST. A valuation of an interest, unit or lease, made in accordance with the requirements set out by the Commissioner in A New Tax System (Goods and Services Tax) Act 1999 Margin Scheme Valuation Requirements Determination 2021 (MSV 2020/1), is an approved valuation of that interest, unit or lease. We have not ruled on whether the Valuation Report prepared by X is an approved valuation in accordance with the requirements of MSV 2020/1.

Relevant facts and circumstances: The Seller are registered for an Australian Business Number (ABN) and goods and services tax (GST) from XX XXX XXXX. The Seller operates under the ABN X. | The Purchaser are registered for an ABN from XX XXX XXXX and GST from XX XXX XXXX. The Purchaser operates under the ABN X. | The Seller acquired the following properties: | • Property 1 under certificate and folio number X (Property 1) in XX XXX XXXX as a fully taxable supply for the price of $XXX (GST inclusive). The margin scheme was not used in this transaction. | • Property 2 under certificate and folio number X (Property 2) in XX XXX XXXX and held it as at XX XXX XXXX. | • The Seller is currently the registered proprietor of Property 1 and Property 2 (the Properties). | The Seller and the Purchaser entered into a Put and Call Option Agreement (PCO Agreement) on XX XXX XXXX. | The PCO Agreement granted the Purchaser the option to purchase the Properties (via the exercise of a call option) and granted the Seller the option to sell the Properties (via the exercise of a put option). | The Purchaser lodged a Development Application (Development Application) on XX XXX XXXX with the council for Property 1 and Property 2. The Development Application was referred to the Central Planning Committee (CPC) as the cost of development exceeded $XXX. The Purchaser logged amended plans and additional information in response to CPC's recommendations on XX XXX XXXX. | The Development Application was approved by CPC on XX XXX XXXX. The Development Application as modified, seeks consent for: | • Demolition of existing building on site | • Site amalgamation of the two separate allotments | • Basement excavation to provide X basements levels including: | • A number -storey tower that is number m (RL number) in height comprising: | On XX XXX XXXX, CPC also approved an application by the Purchaser to modify the development consent. | On XX XXX XXXX, the Purchaser exercised the call option to purchase the Properties. The Contract of sale (Contract) was formed between the Seller and the Purchaser for the Properties. | The Contract under clause X provides that the supply of the Properties under the Contract constitutes one or more supplies of a going concern. The purchase price listed on the Contract was $XXX. | The Seller and the Purchaser have agreed that the purchase price of the Properties for the purpose of clause X of the Contract is to be revised to $XXX (Purchase Price) under the terms of the Deed of Settlement and Release, the terms of which are confidential. The Purchase Price is subject to further adjustments under the Contract. | Clause X of the Contract provided that the Seller and the Purchaser will submit an application for a GST private ruling to determine the matters set out in clause X(a)(i) and (ii) of the Contract. | Clause X of the Contract also provides for certain variations to be made to the Purchase Price if the going concern exemption is not achieved. In summary: | • The Seller will be entitled to a lower Purchase Price if the Commissioner determines that the sales of the Property is not a GST-free supply of a going concern. | • The Contract includes a mechanism that would result in the Seller receiving a reduced Purchase Price in the event the Properties cannot be sold as a GST-free supply of a going concern. | • The adjustment Purchase Price in accordance with clause X of the Contract has been calculated, with the assumption in clause X, and the amount that the Seller receives is reduced by approximately $XXX if the Properties are not sold as a GST-free supply of a going concern. | The Seller and the Purchaser entered into a Deed of Variation to the Contract on XX XXX XXXX, which provides that the transfer of the Properties to the Purchaser will settle on XX XXX XXXX. | The Properties are leased under 3 separate lease agreements. The Seller is the lessor under each of the following lease agreements: | Upon the Properties transfer on XX XXX XXXX, the Purchaser will continue to operate the leasing enterprises under the Lease 1, Lease 2 and Lease 3 (Leases). | The Seller obtained a margin scheme valuation for Property 2 as at XX XXX XXXX with a value of $XXX from X on XX XXX XXXX. | The supply of the Properties to the Purchaser is a GST-free supply of a going concern. | Assumption: For the purposes of this ruling and the use of the margin scheme, a written agreement with future purchasers will be executed, as per the margin scheme requirements. | Does Part IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar. | Is the Seller eligible to use the margin scheme cost base of $XXX, for the future supply of the apartments developed on the amalgamated properties situated at Property 1 and Property 2 pursuant to Division 75 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), being the sum of the following: