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ATO Interpretative Decision

ATO ID 2002/128

Goods and Services Tax

GST and use of margin scheme by superannuation fund
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 superannuation fund, choose to apply the margin scheme to the sale of property under section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it originally purchased the property as a vacant block of land which was not a taxable supply, and subsequently built a house on it? The property was originally purchased on or after 1 July 2000.

Decision

Yes, the entity can choose to apply the margin scheme on the sale of property under section 75-5 of the GST Act when it originally purchased the property as a vacant block of land which was not a taxable supply, and subsequently built a house on it.

Facts

The entity is a superannuation fund. The entity purchased a block of land. The land was purchased after 1 July 2000, however the supply of the land to the entity was not a taxable supply. The entity subsequently built a house on the land and then sold it. The sale is a supply of new residential premises.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under subsection 75-5(1) of the GST Act, if an entity makes a taxable supply of real property by:

•
selling a freehold interest in land;
•
selling a stratum unit; or
•
granting or selling a long-term lease;

the entity may choose to apply the margin scheme in working out the amount of GST on the supply.

However, under subsection 75-5(2) of the GST Act, an entity cannot choose to apply the margin scheme if it acquired the freehold interest, stratum unit or long-term lease through a taxable supply on which the GST was worked out without applying the margin scheme.

Under paragraph 184-1(1)(h) of the GST Act, a superannuation fund is an entity. The entity is making a taxable supply of real property by selling a freehold interest in land. In addition, the entity did not originally acquire the property through a taxable supply.

Therefore, the entity may choose to apply the margin scheme to the sale of the property under section 75-5 of the GST Act when it originally purchased a vacant block of land which was not acquired as a taxable supply, and subsequently had a new residential premise built on it.

[Note: The amount of GST payable using the margin scheme is 1/11 of the margin for the supply (subsection 75-10(1) of the GST Act). As the original acquisition of the property was made after 1 July 2000, the margin for the supply is the amount by which the consideration for the supply exceeds the consideration for the entity's acquisition of the interest in the property being sold (section 75-10(2) of the GST Act). The consideration for the acquisition of the interest is the purchase price of the land only (calculated in accordance with relevant contract provisions) and does not include any of the acquisitions utilised to build the new residential premise on the vacant block of land. Nor does the consideration for the acquisition of the interest include associated legal fees, stamp duty or similar purchase expenses.]

Date of decision:  20 November 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 75-5
   subsection 75-5(1)
   subsection 75-5(2)
   section 75-10
   subsection 75-10(1)
   paragraph 184-1(1)(h)

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

Keywords
Goods & services tax
GST property & construction
GST margin scheme
GST superannuation funds

Business Line:  GST

Date of publication:  8 February 2002

ISSN: 1445-2782

history
  Date: Version:
You are here → 20 November 2001 Original statement
  8 February 2008 Archived

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