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ATO Interpretative Decision

ATO ID 2002/490

Goods and Services Tax

GST, administration costs and the margin scheme
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Can the entity, a property developer, include administration costs incurred in acquiring a property, in calculating the consideration for the acquisition of the interest in that property for the purposes of section 75-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it subsequently sells that property and chooses to apply the margin scheme?

Decision

No, the entity cannot include administration costs incurred in acquiring a property in calculating the consideration for the acquisition of the interest in that property for the purposes of section 75-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it subsequently sells that property and chooses to apply the margin scheme.

Facts

The entity is a property developer. The entity acquired real property after 30 June 2000. The entity acquired the property as a taxable supply on which the vendor chose to use the margin scheme. The entity incurred various administration costs (including stamp duty, registration fees and transfer costs) in the course of acquiring that property.

The entity is now selling the property as a taxable supply. The supply satisfies the requirements in section 75-5 of the GST Act, and the entity is choosing to apply the margin scheme in working out the amount of goods and services tax (GST) payable on the supply.

The entity is registered for GST.

Reasons for Decision

Subsection 75-10(1) of the GST Act provides that if a taxable supply of real property is under the margin scheme, the amount of GST on the supply is 1/11 of the margin for the supply.

The margin for the supply is the amount by which the consideration for the supply exceeds the consideration for an entity's acquisition of the interest, unit or lease in question (subsection 75-10(2) of the GST Act), provided that subsection 75-10(3) of the GST Act does not apply.

As the entity purchased the property after 30 June 2000 and acquired the property through a taxable supply, the margin valuation rules in subsection 75-10(3) of the GST Act do not apply to the supply.

The entity incurred various administration costs (including stamp duty, registration fees and transfer costs) for services obtained in relation to the acquisition of the property. These administration fees do not represent consideration for the entity's acquisition of the interest in the property but rather, represent the consideration for the entity's acquisition of separate supplies of administration services. The consideration for the entity's acquisition of the interest in the property is limited to the purchase price paid by the entity for that property.

Therefore, the entity cannot include administration costs incurred in acquiring the property, in calculating the consideration for the acquisition of the interest in the property under section 75-10 of the GST Act, when it subsequently sells that property and chooses to apply the margin scheme in working out the amount of GST payable on the supply.

[Note: Where the administration services supplied to the entity are taxable supplies, the entity may be entitled to an input tax credit where the requirements in section 11-20 of the GST Act are satisfied.]

Date of decision:  6 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 11-20
   section 75-10
   subsection 75-10(1)
   subsection 75-10(2)
   subsection 75-10(3)

Related ATO Interpretative Decisions
ATO ID 2002/30
ATO ID 2002/31

Keywords
Goods & services tax
GST property & construction
GST margin scheme
GST sale of real property

Business Line:  GST

Date of publication:  30 April 2002

ISSN: 1445-2782

history
  Date: Version:
You are here → 6 August 2001 Original statement
  24 August 2007 Archived

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