Private ruling: GST and margin scheme
Published: January 2013

Ruling: Q1: Can the margin scheme be applied in calculating the goods and services tax (GST) liability on the sale of the Property A and Property B? | A1: No | Q2: What are the GST implications on the following purchases and sale of real property? 1. Vacant land where the sale was made under the margin scheme and you do not hold a valid tax invoice. (Property A) 2. House and land.(Property B) 3. The sale of Property A and Property B and the construction and purchase of a number of units on those properties. | A2: 

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a partnership registered for GST at the time of purchase and sale of the subject property. Property A · You purchased vacant land. At the time of purchase, the land had development approval for a number of residential units. Settlement took place in 200X. · The sale contract stipulated that the transaction was a taxable supply and was made under the margin scheme. · You have not received a tax invoice from the vendor for the purchase of the property. Property B · You purchased a second adjacent property in 2009. · The sale contract stipulated that the sale was a non taxable supply, being a supply of residential property. · You prepared and lodged a development application amalgamating all three properties and eventually council approval was granted for the development of a number of residential units. Property A and Property B combined · You then entered into a contract for the sale of the properties to a State Government Statutory Authority. · The sale consisted of 2 separate titles of land. · Property A being vacant land · and · Property B being House and land. · The sale of the land was contingent on the State Government Statutory Authority and you entering into a second contract for the construction and purchase of the units. · Settlement of the sale of land to the State Government Statutory Authority took place in 2010. In relation to the whether the margin scheme .applied to the sale of the real property the following on page 1 of the Contract are noted: · The box contains the following words "GST amount (optional) The price was exclusive of GST, GST of $..." has been altered with no initials along the alteration: · The handwritten alteration reads · "The price includes GST" · Under the heading "GST: Taxable supply", the "No" box is ticked · Under the heading 'Margin scheme will be used in making the taxable supply, the "No" box is ticked. A Special Clause of the contract states: "The parties agree that the Price herein includes not only the land value but all allowances for all fees incurred by the Vendor in applying for development consent and the construction certificate, including, but not limited to application fees, geotechnical reports, section 94 contributions, demolishing fees and architecture fees. Notwithstanding any other provision, the parties further agree that the Price is GST inclusive"……. There is not any written agreement between the Purchaser and the Vendor regarding margin scheme applying to the sale. Assumptions It is assumed that the house on Property 2 conforms with the definition of residential premises in the GST Act.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 9-5 | Section 9-20 | Section 11-5 | Section 11-15 | Section 11-20 | Section 29-70 | Section 40-65 | Section 40-75 | Section 75-5 | Section 75-20 | Section 75-30

Reasons for decision: Summary: What documentation, if any, is required to be produced by the vendor and the purchaser on settlement of the purchase and sales transactions? | Detailed Reasoning - Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a partnership registered for GST at the time of purchase and sale of the subject property. | Detailed Reasoning - Property A: · You purchased vacant land. At the time of purchase, the land had development approval for a number of residential units. Settlement took place in 200X. · The sale contract stipulated that the transaction was a taxable supply and was made under the margin scheme. · You have not received a tax invoice from the vendor for the purchase of the property. | Detailed Reasoning - Property B: · You purchased a second adjacent property in 2009. · The sale contract stipulated that the sale was a non taxable supply, being a supply of residential property. · You prepared and lodged a development application amalgamating all three properties and eventually council approval was granted for the development of a number of residential units. | Detailed Reasoning - Property A and Property B combined: · You then entered into a contract for the sale of the properties to a State Government Statutory Authority. · The sale consisted of 2 separate titles of land. · Property A being vacant land · and · Property B being House and land. · The sale of the land was contingent on the State Government Statutory Authority and you entering into a second contract for the construction and purchase of the units. · Settlement of the sale of land to the State Government Statutory Authority took place in 2010. In relation to the whether the margin scheme .applied to the sale of the real property the following on page 1 of the Contract are noted: · The box contains the following words "GST amount (optional) The price was exclusive of GST, GST of $..." has been altered with no initials along the alteration: · The handwritten alteration reads · "The price includes GST" · Under the heading "GST: Taxable supply", the "No" box is ticked · Under the heading 'Margin scheme will be used in making the taxable supply, the "No" box is ticked. A Special Clause of the contract states: "The parties agree that the Price herein includes not only the land value but all allowances for all fees incurred by the Vendor in applying for development consent and the construction certificate, including, but not limited to application fees, geotechnical reports, section 94 contributions, demolishing fees and architecture fees. Notwithstanding any other provision, the parties further agree that the Price is GST inclusive"……. | Detailed Reasoning - Assumptions: It is assumed that the house on Property 2 conforms with the definition of residential premises in the GST Act. | Detailed Reasoning - Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 9-5 Section 9-20 Section 11-5 Section 11-15 Section 11-20 Section 29-70 Section 40-65 Section 40-75 Section 75-5 Section 75-20 Section 75-30 | Summary: You may only use the margin scheme to calculate the GST payable on your sale of Property A provided that, by the time of sale (or within such further period as the Commissioner allows), you and the purchaser agree in writing that the margin scheme will be used. (Amongst other requirements) | Detailed Reasoning - Margin Scheme: The margin scheme is an alternative method by which a supplier is able to calculate the amount of GST payable on a supply of property. Division 75 of the GST Act outlines the margin scheme. Section 75-5 of the GST Act sets out the requirements to be satisfied in order to use the margin scheme. Section 75-5(1) of the GST Act states: | Detailed Reasoning - Applying the margin scheme: The *margin scheme applies in working out the amount of GST on a *taxable supply of *real property that you make by: (a) selling a freehold interest in land; or (b) selling a *stratum unit; or (c) granting or selling a *long term lease; if you and the *recipient of the supply have agreed in writing that the margin scheme is to apply. Note: The asterisks denote a defined term in section 195-1 of the GST Act The supply of the properties is a mixed supply as the supply contains separately identifiable taxable and non-taxable parts. The sale of Property B is input taxed supply whilst the sale of Property B is a taxable supply. The sale contract clearly states the 2 separate titles of land. The facts indicate that there has been an input tax supply of residential premises and also a taxable supply of vacant land. Therefore parts (a) to (c) of section 75-5(1) of the GST Act are satisfied. However, this section further states "if you and the *recipient of the supply have agreed in writing that the margin scheme is to apply". Further, subsection 75-5(1A) of the GST Act states: The agreement must be made: (a) on or before the making of the supply; or (b) within such further period as the Commissioner allows. You have advised that there has not been any agreement in writing that the margin scheme was to apply to the sale. Subsection 75-5(2) of the GST Act states: However, the *margin scheme does not apply if you acquired the entire freehold interest, *stratum unit or *long term lease through a supply that was *ineligible for the margin scheme. Subsection 75-5(3) of the GST Act sets out the circumstances when a supply is ineligible for the margin scheme. 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 deals with the application of the margin scheme under Division 75 of the GST Act and provides the Tax Office view of supplies made under the margin scheme Paragraph 13 of GSTR 2006/8 states: 13. Under the margin scheme, the GST payable on the supply of real property is 1/11th of the margin for the supply. The margin for the supply is the amount by which the consideration for the supply exceeds the consideration for the acquisition of the real property unless subsection 75-10(3) or section 75-11 applies. Section 75-11 applies to supplies made on or after 17 March 2005. Whether you can use the margin scheme depends on how and when you first purchased your property. You can use the margin scheme if you purchased the property from someone: · that was not registered or required to be registered for GST, or · who sold you existing residential premises, or · who sold the property to you as part of a GST-free going concern, or · who sold you the property using the margin scheme. You cannot use the margin scheme if when you first purchased the property the sale to you was fully taxable and the margin scheme was not used. Paragraphs 18 and 27 of GSTR 2006/8 state the following in relation to the margin scheme: 18. Subsection 75-5(1) provides that you may use the margin scheme if the supplier and the recipient have agreed in writing that the margin scheme is to apply. Subsection 75-5(1A) provides that the agreement must be made on or before making the supply, or within such further period as the Commissioner allows 27. Commonly, contracts specify that there is no GST payable on a supply, but that if the supply is taxable then the GST payable will be calculated under the margin scheme. In these circumstances, the Commissioner accepts that the requirements in paragraph 75 If you are liable to pay GST when you sell real property, you may be eligible to use the margin scheme to work out the amount of GST if you have made a written agreement with the purchaser that the margin scheme applies to the sale. The agreement must be made on or before the sale of the property or within such further period as the Commissioner allows. In this case the sale consisted of 2 separate titles of land. The sale of the Property B was a non taxable supply; being a supply of residential property therefore the sale is an input taxed supply and accordingly the margin scheme cannot apply to the sale of this property as no GST is applicable to the sale of this property. The sale of the Property A consisted of vacant land which was a taxably supply to you which you purchased under the margin scheme therefore providing all the requirements of section 75-5 of the margin scheme have been met you may be able to apply the margin scheme to the subsequent sale. Under section 75-5 of the GST Act, all the requirements (other that the requirement to have a written agreement on or before the sale of the property) to apply the margin scheme are met if: · you sold a freehold interest in land, a stratum unit or selling or granting a long-term lease you did not acquire the property that you sold: · from a supplier who made a taxable supply but did not work out the GST payable on the property using the margin scheme · by inheritance from a person who would not have been able to apply the margin scheme · as a member of a GST group from another member of the group who would not have been able to apply the margin scheme · as a participant in a GST joint venture from the joint venture operator who would not have been able to apply the margin scheme · as a GST-free going concern or farmland from a supplier who previously purchased the property in which GST was worked out without using the margin scheme · for no payment from an associate and the associate had purchased the property in which GST was worked out without using the margin scheme. In your case you meet all the requirements under section 75-5 of the GST Act. However, where a written agreement is not made by the time the property is sold, you cannot use the margin scheme unless the Commissioner exercises his discretion to allow a further period after the sale for the agreement to be made. In this case a written agreement was not made by the time the property was sold and unless a request made to the Commissioner to exercise his discretion you are unable to apply the margin scheme to the sale of the property. (Please note that a request that the Commissioner exercises his discretion to allow a further period after the sale for the agreement to be made must be made in writing to the ATO) | Detailed Reasoning - Commissioner's discretion: Law Administration Practice Statement PS LA 2005/15 sets out the circumstances in which the Commissioner may exercise his discretion under subsection 75-5(1A) of the GST Act. Generally, the discretion will be exercised where the Commissioner is satisfied: · that all the requirements (other than the requirement for an agreement in writing to be made on or before the sale of the property) to apply the margin scheme are met · there is no arrangement that has the effect of producing an outcome contrary to the policy of the legislation. Paragraph 12 of the Practice Statement provides examples of cases where it may be appropriate to exercise the discretion as stated below. In considering whether to exercise the discretion, the Commissioner will look at the circumstances of each case to consider what would be fair and reasonable to all parties. In doing so, the Commissioner will consider the delay in entering into the agreement, the explanation for the delay and any other relevant circumstances, bearing in mind that this is an ameliorating provision designed to avoid injustice. The following are examples of those cases which may be more common and where it may be appropriate to exercise the discretion: · the supplier and recipient of the supply agreed to apply the margin scheme, but inadvertently failed to put the agreement in writing by the time the supply is made; · the failure to agree to apply the margin scheme was due to a genuine mistake. For example, the supply was mistakenly believed to be a GST-free supply or the supplier mistakenly considered it was not required to be registered for GST; · the supply was intended to be made to an entity that was entitled to an input tax credit on its acquisition, but instead the supply was made to an entity that was not entitled to an input tax credit. For example, the supply was made to an unregistered entity; or · the supply was made without the parties agreeing to apply the margin scheme, but the recipient of the supply realises that it wishes to apply the margin scheme to a supply that it will subsequently make to a third party (which the recipient cannot do if GST on the supply to it is not calculated under the margin scheme). For further information on the margin scheme, refer to the ATO website at www.ato.gov.au and in particular the publication: GST and the margin scheme guide (NAT 15145), and the list of relevant public rulings/publications on page 17 of that guide. | Detailed Reasoning - Detailed reasoning: GST is a transaction based tax. GST is payable on the value added at each stage of the commercial chain of dealings with goods, services and other things and therefore each individual supply needs to be considered and analysed to identify the characterisation of the supply and the GST consequences. The tax liability (and the obligations of recording and reporting), is not consumption but a particular form of transaction, namely supply. Therefore, a supply is a form of transaction. The transaction broadly is in the commercial chain of dealings with goods, service and other things. | Detailed Reasoning - Creditable acquisition: Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are entitled to the input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act lists the requirements that must be satisfied for an acquisition to qualify as a creditable acquisition and thus give rise to an input tax credit entitlement. This section states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered or *required to be registered. You acquire a thing for a creditable purpose to the extent that you acquire the thing in carrying on your enterprise. However, you do not acquire a thing for a creditable purpose to the extent that the acquisition relates to making input taxed supplies or is of a private or domestic nature. | Detailed Reasoning - ITC entitlement: The amount of GST payable on the taxable supply to you is calculated by reference to sections 9-70 and 9-75 of the GST Act. The amount of your input tax credit entitlement is equal to the amount of GST payable by the supplier on its taxable supply (see section 11-25 of the GST Act). | Detailed Reasoning - Purchase of Property A: As the margin scheme was applied to the sale of the property, pursuant to section 75-20 of the GST Act your acquisition was not a creditable acquisition. This section states: (1) An acquisition of a freehold interest in land, a *stratum unit or a *long term lease is not a *creditable acquisition if the supply of the interest, unit or lease was a *taxable supply under the *margin scheme. (2) This section has effect despite section 11-5 (which is about what is a creditable acquisition). Therefore, as you acquired the property under the margin scheme, you are not entitled to claim input tax credits on your acquisition of the property. | Detailed Reasoning - Tax Invoice: Under subsection 29-70(2) of the GST Act, the supplier of a taxable supply must issue a tax invoice for the supply within 28 days of a request for one by the recipient of the supply. However, section 75-30 of the GST Act provides that a supplier is not required to issue a tax invoice for a taxable supply that is solely a supply of real property under the margin scheme. Section 75-30 of the GST Act states: (1) You are not required to issue a *tax invoice for a taxable supply that you make that is solely a supply of *real property under the *margin scheme. (2) This section has effect despite section 29-70 (which is about the requirement to issue tax invoices). On the facts provided, the margin scheme was applied to the sale of the property, then by virtue of section 75-30 of the GST Act, there is no requirement for the vendor to issue you a tax invoice. | Detailed Reasoning - Purchase of Property B: As mentioned above section 11-5 of the GST Act defines the term 'creditable acquisition' and states that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose; and (b) the supply of the thing to you is a taxable supply; and (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered, or required to be registered. Based on the facts provided, you satisfy paragraphs 11-5(c) and 11-5(d) of the GST Act as · you will pay consideration for the supplies made to you, and · you are registered for GST. One of the requirements for a creditable acquisition under paragraph 11-5(a) and 11-5(b) of the GST Act is that you acquire the thing(s) for a creditable purpose and the supply of the thing to you is a taxable supply. | Detailed Reasoning - The supply of the thing to you is a taxable supply: Whether or not a supply is a taxable supply to you is determined by the supplier's circumstances. A supplier will make a taxable supply if all the requirements of section 9-5 of the GST Act are satisfied. Under section 9-5 of the GST Act, an entity makes a taxable supply if: · it makes the supply for consideration · the supply is made in the course or furtherance of an enterprise that the entity carries on · the supply is connected with Australia, · and the entity is registered or required to be registered. However the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case the supply of the property to you was an input taxed supply of residential premises and not a taxable supply. As such, where the supply of the goods and services to you is not a taxable supply (that is, the supplier has not charged you GST on your acquisitions), you will not satisfy all the requirements under section 11-5 of the GST Act and will not be entitled to claim ITCs on your creditable acquisitions. | Detailed Reasoning - Acquired solely or partly for a creditable purpose: Section 11-15 of the GST Act explains that you have acquired a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise: However you do not acquire it for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed or the acquisition is of a private or domestic nature. You have advised that you incurred expenses when you purchased the property and also later sold the property and that these expenses were incurred as part of carrying on your enterprise. These expenses were incurred in making input taxed supplies. Accordingly, the requirement of paragraph 11-5(a) of the GST Act is also not satisfied. As such, where the supply of the goods and services to you (to make the input taxed supply) is not made for a creditable acquisition, you will not satisfy all the requirements under section 11-5 of the GST Act and will not be entitled to claim ITCs on your acquisitions. | Detailed Reasoning - The sale of Property A and Property B: The facts indicate that the contract of sale for Property A and Property B is for two lots with two separate titles, with Property B consisting of the residential dwelling. Accordingly, there are separate supplies of two properties. As mentioned previously, GST is payable on a taxable supply under section 9-5 of the GST Act. The facts indicate that you (as the vendor) satisfy all the requirements under paragraphs 9-5(a) to 9-5(d) of the GST Act as follows: (a) you makes the supplies of the properties in return for consideration; (b) the supplies are made in the course or furtherance of your enterprise; (c) the supplies are connected with Australia as the properties are located in Australia; and (d) you are registered for GST. Property B has a residential house, whereas Property A is a vacant lot of land. The supplies of the properties in the circumstances you have described are not GST-free. What remains to be determined is whether the sale of each property is an input taxed supply. | Detailed Reasoning - Input taxed supply: The term 'residential premises' is defined in section 195-1 of the GST Act. It states: residential premises means land or a building that: (a) is occupied as a residence or for residential accommodation; or (b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation; (regardless of the term of the occupation or intended occupation) and includes a *floating home. Whether or not a building on a property is occupied as a residence or is capable of being occupied as a residence is a question of fact. Goods and Services Tax Ruling GSTR 2000/20 and Draft Goods and Services Tax Ruling GSTR 2012/D1 cover residential premises and commercial residential premises. The requirement in section 40-65 of the GST Act that premises are residential premises to be used predominantly for residential accommodation is to be interpreted as a single test that looks at the characteristics of the property. The requirement for residential premises to be used predominantly for residential accommodation does not require an examination of the subjective intention or use of any particular person. It is the objective intention with which the premises are designed, built or modified that is relevant. The focus is on the physical characteristics of the premises in terms of their suitability for residential accommodation. That is, they possess features necessary for residential accommodation, and are able to be occupied as residential accommodation. There is no specific restriction, in the definition of residential premises, on the area of land that can be included with a building. The extent to which land forms part of residential premises to be used predominantly for residential accommodation is a question of fact and degree in each case. A relevant factor in determining this is the extent that the physical characteristics of the land and building as a whole indicate that the land is to be enjoyed in conjunction with the residential building. However, vacant land is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land is not residential premises. | Detailed Reasoning - Property B - residential house: In relation to Property B, from the facts provided it satisfies the definition of residential premises in section 195-1 of the GST Act. The next step is to determine whether the sale of this property is excluded from being input taxed under subsection 40-65(2) of the GST Act. Subsection 40-65(2) of the GST Act provides that the sale of residential premises is not input taxed to the extent that the residential premises are: (a) commercial residential premises, or (b) new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998. The definition of commercial residential premises is provided in section 195-1 of the GST Act. It includes, amongst other things, a hotel, motel, inn, hostel, or boarding house. In your circumstances, property A is not considered to be commercial residential premises, and paragraph 40-65(2)(a) of the GST Act does not apply. The term 'new residential premises' is defined in subsection 40-75(1) of the GST Act. In your circumstances, Property B is not new residential premises, has not undergone/been created through substantial renovations, nor has it been replaced by demolished premises on the same land. Paragraph 40-65(2)(b) of the GST Act does not apply. The sale of Property B is not excluded from being input taxed under subsection 40-65(2) of the GST Act. Accordingly, the sale of the property at Property B is an input taxed supply, and no GST is payable on this supply. | Detailed Reasoning - Property A - Vacant land: In relation to the property at Property A, this property is a vacant lot of land. Vacant land is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land does not satisfy the definition of residential premises in section 195-1 of the GST Act. Accordingly, the supply of Property A will not be input taxed supplies, and is a taxable supply. GST will be payable on this supply. | Detailed Reasoning - Summary - entitlement to ITCs: There is a mixed supply which is partly input taxed and partly taxable. The supply of Property B (residential house) to you is an input taxed supply and GST is not payable on this supply. Therefore, you will not satisfy the requirement of paragraph 11-5(b) of the GST Act and are not entitled to claim an ITC on the acquisition of Property B. The supply of Property A (vacant land) to you is a taxable supply under section 9-5 of the GST Act, and therefore you will satisfy the requirement of paragraph 11-5(b) of the GST Act and are entitled to claim an ITC on the acquisitions of goods and services relating to the sale. | Detailed Reasoning - Apportioning the consideration for a mixed supply: As there is a mixed supply, where there is a single consideration for the sale of the properties, you and the purchaser will need to apportion the consideration on a fair and reasonable basis. You and the purchaser must keep records on how the calculation was made. For further information on apportioning the consideration for a mixed supply refer to Goods and Services Tax Ruling GSTR 2001/8. You will be required to remit 1/11 th of the consideration received for the sales of the property at Property A, and you will be entitled to claim ITCs for the GST paid on the acquisitions of goods and services relating to the sale of the property at Property A. The construction and purchase of a number of units on Property A and property B Whether you are able to claim ITCs on the purchase of the units at Property A and property B largely depends on whether the vendor is eligible to and applies the margin scheme to the sale of the property. The sale of Property A and property B could be sold under either of 2 schemes; the normal scheme or the margin scheme. The sale is of new residential premises and is a taxable supply under section 9-5 of the GST Act. If this is the case you would be able to claim ITCs on the GST payable for the purchase. Under the margin scheme (if applicable), the GST payable on the supply of real property is 1/11th of the margin for the supply. The margin for the supply is the amount by which the consideration for the supply exceeds the consideration for the acquisition of the real property unless subsection 75-10(3) of the GST Act or section 75-11 of the GST Act applies. Section 75-11 of the GST Act applies to supplies made on or after 17 March 2005. Further information on the eligibility requirements for the margin scheme can be found in GSTR 2006/8 or other margin scheme publications available on the ATO website available by typing "margin scheme" in the search area. Note: All public rulings and publications are available on the Australian Taxation Office website at www.ato.gov.au | Detailed Reasoning - ATO record keeping: You are required to keep and retain documents in relation to any election, choice, estimate, determination or calculation made under a taxation law. The documents should contain the particulars of any election, choice, estimate, determination or calculation. In the case of an estimate, determination or calculation, the documents should also contain the basis on which, and the method by which the estimate, determination, or calculation was made. You must retain those records for at least 5 years after the completion of the transaction or acts to which they relate. The records are to be kept in a manner so as to enable your entitlement to an input tax credit under the GST Act to be readily ascertained. If you make a taxable supply, you must keep records that record and explain all transactions and other acts you engage in that are relevant to that supply. Records that are relevant to a supply under the margin scheme will include evidence of your choice to use the margin scheme, and when that choice was made. If you are calculating the margin for the supply under subsection 75-10(3), you will also need to keep records that clearly indicate which valuation method has been used. | Detailed Reasoning - Tax Invoice: If you are registered for GST, you can generally claim a credit for any GST included in the price you pay for things for your business. If the purchase price is more than $82.50 (including GST), you need a tax invoice from your supplier to claim the GST credit. Tax invoices are important documents for the operation of the GST system. Tax invoices must contain certain information to be valid. These requirements are detailed below. A valid tax invoice is a document that meets all of the following requirements: · it is issued by the supplier, unless it is an RCTI (in which case it is issued by the recipient) · it contains enough information to enable the following to be clearly identified · the supplier's identity and ABN · a brief description of what is sold, including the quantity (if applicable) and the price of what is sold · the extent to which each sale is a taxable sale - this can be shown separately or, if the GST to be paid is exactly one-eleventh of the total price, as a statement such as 'total price includes GST' · the date the document is issued · the amount of GST (if any) payable for each sale · if the document was issued by the recipient and GST is payable for any sale - that the GST is payable by the supplier · that the document was intended to be a tax invoice or an RCTI if it was issued by the recipient. In addition, if the total price of the sale is at least $1,000 or if the document was issued by the recipient, the recipient's identity or ABN must be able to be clearly identified. | Detailed Reasoning - Contract: A standard land contract is not an invoice for GST purposes as it does not notify an obligation to make a payment (GSTR 2000/28 paragraph 29). This means that entering into a standard land contract will not trigger attribution of GST payable or input tax credits where you account for GST on a non cash basis. 'Invoice' means a document notifying an obligation to make a payment (section 195-1 of the GST Act). An agreement which is in substance 'subject to contract', or a contract containing a condition or conditions precedent will not satisfy this definition as no legally binding contract is in existence. Condition subsequent contracts are also unlikely to be invoices as the 'obligation to make a payment' is uncertain, as it is determinant upon the satisfaction of the conditions. This occurs, despite the contracts ability to generate a right to damages where the beneficiary party has not made reasonable efforts to satisfy the condition. This can hardly be said to be an 'obligation to make a payment'. A contract is a legally binding agreement enforceable at law. A contract for the sale of land does not create an immediate debt. The purchaser may sue for specific performance or damages and costs. However, a debt to the settlement amount does not generally arise until the contract has been completed by the execution and acceptance of a conveyance. At that time, the purchaser obtains dispositive power over the property, and the contingency that the sale will not proceed to completion disappears. A presently existing legal 'obligation' to the settlement money does not arise until such time. | Detailed Reasoning - Settlement documentation: Documents usually lodged with the relevant Land Titles Office, along with the necessary fees, after settlement includes: · memorandum of transfer - to transfer the certificate of title from the vendor's name into the buyer's · memorandum of mortgage - the buyer's mortgage is registered on the property's certificate of title · discharge of mortgage - removes the vendor's mortgage from the certificate of title. Please note that a settlement statement is not a tax invoice for GST purposes.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Other references (non ATO view, such as court cases) | GST and the margin scheme NAT 15145 | Margin scheme made easy NAT 73740 | Eligibility to use the margin scheme when selling property NAT 73792 | Property and construction issues register