Private ruling: GST and margin scheme valuation date
Published: March 2015

Ruling: Q1: Can you use the date you register for GST as the valuation date under subsection 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you choose to apply the margin scheme to the sale of real property acquired before 1 July 2000? | A1: Yes, you can use the date when you register for GST as the valuation date under subsection 75-10(3) of the GST Act when you choose to apply the margin scheme to the sale of real property acquired before 1 July 2000. | Q2: Will the margin be determined based on the difference in value at the time of GST registration and the date of sale? | A2: Yes, the margin will be determined based on the difference in value at the time of GST registration and the date of sale.

Relevant facts and circumstances: You have never been registered for the goods and services tax (GST). You purchased a block of land with a building comprising residential units, before 1 July 2000. You collected rental income during the years of ownership. You will demolish the existing buildings, subdivide the land, construct new residential premises and sell them to individual unrelated buyers. You will use the valuation date under subsection 75-10(3) of the GST Act to apply the margin scheme for the above transaction. You will register for the GST, claim the GST credits on the costs of demolition and once the properties are individually sold you will remit GST on the difference in value between the consideration received and the valuation at the time of GST registration. You will use the services of a professional valuer at the time of GST registration.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 -Subsections 75-10(1); 75-10(3) Question 1 | Summary | Yes, you can use the date when you register for GST as the valuation date under subsection 75-10(3) of the GST Act when you choose to apply the margin scheme to the sale of real property acquired before 1 July 2000.

Reasons for decision: Summary: Yes, the margin will be determined based on the difference in value at the time of GST registration and the date of sale. | Detailed Reasoning - Reasons for decision: Subsection 75-10(1) of the GST Act provides that where the margin scheme is applied to a taxable supply of real property under the margin scheme, the amount of GST on the supply is 1 / 11th of the margin for the supply. Subsection 75-10(3) of the GST Act provides that, subject to section 75-11 of the GST Act, where the real property was acquired before 1 July 2000, the margin for the supply is the amount by which the consideration for the supply (sale price) exceeds the valuation of the freehold interest in the land.

Subsection 75-10(3) of the GST Act provides that if: | • the circumstances specified in an item in the table in subsection 75-10(3) of the GST Act (the table) applies to the supply, and | • an approved valuation of the freehold interest, stratum unit or long term lease, as at the day specified in the corresponding item in the third column of the table, has been made. | the margin for the supply is the amount by which the consideration for the supply exceeds that valuation. | Therefore, the date when the valuation of the interest must be made will depend on which item in the table in subsection 75-10(3) of the GST Act applies. | Item 2 provides that where the supplier acquired the interest unit or lease before 1 July 2000, but does not become registered or required to be registered until after 1 July 2000, the valuation date is the earlier of either the date of effect of the entity's registration or the day on which the entity applied for registration. | That is, Item 2 only applies to determine the valuation date in circumstances where the supplier was not registered or required to be registered until after 1 July 2000. | Accordingly, your supply of real property satisfies the requirements of Item 2 and therefore, the valuation date to be used is the date of effect of your registration or the day you applied for registration (if it is earlier).