GST and the margin scheme

Sales of property you originally purchased before 1 July 2000

If you are selling property under the margin scheme and you originally purchased (or held an interest in) it before 1 July 2000, you can choose to pay the GST on the difference (that is, the margin) between either the sale price and the:

• price you paid when you purchased the property (the consideration method), or
• value of the property at a relevant valuation date, usually 1 July 2000 (the valuation method).

Example 4:

Tom is registered for GST and is carrying on a business of leasing commercial property. Tom bought one of his commercial properties in 1989 for $50,000. He sells this commercial property in 2003 for $105,000 using the margin scheme. If Tom applies the consideration method to calculate his GST liability, the margin is $55,000 ($105,000 - $50,000). Tom's GST liability is 1/11th of this amount, which is $5,000.

However, if Tom decides to use the valuation method and obtains a market valuation (approved) of the property as at 1 July 2000 and the property is valued as $61,000, then the margin is $44,000 ($105,000 - $61,000). Tom's GST liability would then be 1/11th of this amount, which is $4,000.

For ways of working out the valuation at 1 July 2000, refer to GSTR 2006/7 Goods and services tax: Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000.

Sections within Working out the margin and GST payable

• Sales of property you originally purchased before 1 July 2000
• Sales of property you originally purchased on or after 1 July 2000
• Sales of property you make on or after 17 March 2005
• Sales of property you make on or after 29 June 2005
• Sales of property you originally purchased on or after 9 December 2008
• Property you purchased as a mixed supply
• Working out the purchase price for subdivided land