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  • Have you used the margin scheme correctly?

    The margin scheme reduces the amount of GST that would normally be payable on sales of new property. It's not an automatic concession and the sale must be eligible for it to be applied.

    Since the introduction of GST at settlement, we have seen a higher than expected number of new residential property sales applying the margin scheme.

    Our GST property decision tool can assist you to calculate the margin.

    Eligibility to use the margin scheme

    Determine if you're eligible to use the margin scheme before a property is initially offered for sale.

    The margin scheme can be applied on subsequent property sales depending on:

    • the original date of purchase
    • how GST was applied at that time.

    Property purchases prior to 1 July 2000 are eligible, as the property had not been subject to GST previously.

    Property purchases after 1 July 2000 may only apply the margin scheme to a subsequent sale when one of the following applies:

    • the original seller of the property wasn't registered for GST
    • the property was purchased as an existing residential premises
    • the original seller sold the property as a GST-free supply (for example, a going concern or farmland) and was eligible to use the margin scheme
    • the seller sold the property and applied the margin scheme at that time.

    Other considerations

    There are limitations on the margin scheme in some situations. These involve:

    • inheritances
    • the supplier being a member of a GST group
    • the property is GST-free (going concern or farmland).

    In these situations, if the supplier wasn't eligible to use the margin scheme, you can't use the scheme when selling the property.

    New properties

    If the margin scheme is being applied to the sale of new residential properties, it must be agreed to by the seller and purchaser before the settlement date. This can be done by including the agreement in the sales contract.

    The sale of new residential properties may be subject to GST at settlement.

    Supplying new properties

    When supplying new residential premises, you need to include the standard elements of reporting GST on your activity statement at:

    • label G1 Total sales
    • label 1A GST on sales.

    Purchasing new properties

    When purchasing a new residential property and the margin scheme is part of the property transaction, withhold 7% of the contract price (including GST and the market value of non-monetary consideration) and pay it to us at settlement.

    See also:

    Last modified: 20 Sep 2019QC 60151