GST and the margin scheme
This guide will help you:
- decide whether to use the margin scheme
- calculate GST correctly if you use it.
This document takes into account the legislative changes to the margin scheme that came into effect on 9 December 2008.
This measure intends to ensure that the interaction between the margin scheme provisions and the going concern, farmland and associate provisions does not allow property sales to be structured in a way that results in GST not applying to the value added to property once it enters the GST system.
About the margin scheme
The margin scheme is a way of working out the GST you must pay when you sell property as part of your business. You can only apply the margin scheme if the sale of the property is taxable.
If you purchase property where the margin scheme was applied to the sale, you cannot claim a GST credit for the GST included in the purchase price of the property.
The margin scheme cannot be used on your property sale if you originally purchased the property as fully taxable and the margin scheme was not used. In this situation you may be able to claim the GST included in the purchase price if the property is going to be used in your business.
When you cannot use the margin scheme
If you were charged the full rate of GST when you originally purchased the property, the margin scheme can't be used. Generally, if you were charged the full rate of GST when you purchased a property as part of your business you would have claimed the GST back.