Private ruling: GST and the use of the margin scheme
Date of advice: 21 August 2018
Published: October 2018

Ruling: Q1: Is the seller to use the margin scheme in relation to the sale of the relevant properties? | A1: Where the previous seller(s) supplied the properties to the current seller under the going concern provision the current seller can use the margin scheme when it subsequently sells the properties.

Relevant facts and circumstances: We are advised that the previous seller(s) supplied the properties to the current seller under the going concern provision.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) subsection 75-5(1)

Reasons for decision: Summary: Under subsection 75-5(1) of the of the GST Act, the margin scheme may only apply in working out the amount of GST on a taxable supply of real property if the supplier and recipient of the supply have agreed in writing that the margin scheme is to apply to the supply. The agreement must be made on or before the making of the supply, or within such further period as the Commissioner allows. The supplies in this case were made after DD/MM/YYYY. The Vendor and the Purchaser (and therefore the Nominee) have agreed in writing (in the Particulars of Sale in the Contract) that the margin scheme would apply. Other than satisfying the requirement of the written agreement, to apply the margin scheme, the vendor must be making a taxable supply by: ● selling a freehold interest in land; ● selling a stratum unit; or ● supplying a long term lease. However, the vendor will not be able to use the margin scheme if it is selling real property that it: ● acquired through a taxable sale on which the margin scheme was not used; ● inherited from a person who would not have been able to use the margin scheme; ● acquired from a member of the same GST group who would not have been able to use the margin scheme; or ● as a participant in a GST joint venture, acquired from the joint venture operator who would not have been able to use the margin scheme. Where the previous seller(s) supplied the properties to the current seller under the going concern provision the current seller can use the margin scheme when it subsequently sells the properties.