Private ruling: GST and application of the margin scheme
Date of advice: 21 January 2016
Published: March 2016

Ruling: Q2: Does the Commissioner agree that the proposed method of apportioning the purchase price (cost base) to apply the margin scheme is fair and reasonable? Advice/Answers Yes. The method proposed is acceptable to the Commissioner (see paragraphs 58-61 of Goods and Services Tax Ruling GSTR 2006/8 Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000).

Relevant facts and circumstances: You have purchased the land from the Vendor. The land is comprised of various lots. The Vendor provided evidence to you that they acquired the land at a cost of $xxx You and the Vendor were registered for GST at the time that you acquired the land. The Vendor provided evidence to you that they acquired the land through taxable supplies on which the margin scheme was used to calculate the GST payable. You acquired the land as a GST-free supply of a going concern. You will develop new residential premises on the land and apply the margin scheme to the sale of lots comprising of those premises. You will calculate the margin for lot sales from the land by apportioning the consideration for the original land acquired on the basis of area (being: the area of a saleable lot / total saleable area of the development x $xxx.

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


Question 1: Are you entitled to apply the margin scheme under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) to calculate your GST liability on the sale of land? | As you have acquired the land as a GST-free going concern, paragraph 75-5(3)(e) of the GST Act requires that the entity who supplied the property to you, (the Vendor), must not have acquired the land through a taxable supply on which GST was worked out without applying the margin scheme. | The facts indicate that the margin scheme was applied to the supply of the land to the Vendor. | Accordingly, your future supply of the lots will not be ineligible for the margin scheme because of paragraph 75-5(3)(e).