• Goods and services tax (GST) - margin scheme

    If you sell property as part of your business, you may be eligible to use the goods and services tax (GST) margin scheme as a concessional way of working out the GST you must pay. You can only apply the margin scheme if the sale of the property is subject to GST.

    About the GST margin scheme

    You can only apply the margin scheme if the sale of the property is subject to GST - for example, if you build new residential premises or sell subdivided vacant land that you have developed as part of your business.

    If you use the margin scheme, GST only needs to be paid on the margin for the sale and not the total sale price. Your margin is generally the difference between the sale price and one of the following:

    • the amount you paid for the property
    • the value of the property provided in an approved valuation at the applicable valuation date if certain conditions are satisfied.

    When can you use the margin scheme?

    You can use the margin scheme on your property sales if you acquired the property before 1 July 2000.

    You may also be able to use the margin scheme on your property sales if you acquired the property after 1 July 2000 and the person who sold you the property met one of the following:

    • was not registered or required to be registered for GST
    • sold you old residential premises
    • sold you the property using the margin scheme
    • sold the property to you as part of a GST-free going concern
    • sold the property to you as GST-free farmland.

    If the contract for sale was made on or after 29 June 2005 both the buyer and seller must agree in writing that the margin scheme applies, before the sale is settled.

    In some circumstances, you may be able to use the margin scheme where you amalgamate the fully taxable purchased property with other property purchased where the margin scheme can be used.

    When can't you use the margin scheme?

    In some circumstances, if the person (entity) who you acquired the property from was ineligible to use the margin scheme, you will also be ineligible to use the margin scheme.

    If you were charged the full rate of GST when you originally purchased the property, you cannot use the margin scheme. If you are not sure, talk to your accountant or us.

    See also:

    Last modified: 13 May 2016QC 33640