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ATO Interpretative Decision

ATO ID 2001/392 (Withdrawn)

Goods and Services Tax

GST and agreement to apply the margin scheme
FOI status: may be released
  • This ATO ID is withdrawn as it is superseded by GSTR 2006/7 and GSTR 2006/8.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 25 January 2008
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is the entity, a purchaser of real property, required, under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to consent to the vendor's application of the margin scheme to the supply of that property?

Decision

No, the entity is not required, under Division 75 of the GST Act, to consent to the vendor's application of the margin scheme to the supply of that property.

Facts

The entity is a purchaser of a freehold interest in land. The supply of the real property to the entity is a taxable supply under section 9-5 of the GST Act.

Upon settlement, the vendor advised the entity of its intention to apply the margin scheme to the sale of the property. There was no previous agreement between the entity and the vendor to apply the margin scheme to the sale of the real property.

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

Reasons for Decision

Subsection 75-5(1) of the GST Act provides that where a vendor makes a taxable supply of real property by:

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

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

As such, it is the vendor's choice whether or not to apply the margin scheme to the supply. Furthermore, there is no provision in Division 75 of the GST Act that require the vendor to obtain consent from the purchaser before applying the margin scheme to the supply.

Therefore, the entity is not required to consent to the vendor's application of the margin scheme to the supply of the real property under subsection 75-5(1) or any other provision of the GST Act.

[Note: This does not prevent the vendor and the entity from entering into contractual arrangements concerning the application of the margin scheme as part of the negotiations relating to the sale/purchase process undertaken by both parties. However, there is no legislative requirement for this to occur and any such agreement is at the discretion of the vendor.]

Date of decision:  9 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 75
   subsection 75-5(1)

Related Public Rulings (including Determinations)
GSTR 2000/21

Other References:
Property and Construction Issues Log - Issue 15.1.9 & 15.1.16

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

Business Line:  GST

Date of publication:  29 September 2001

ISSN: 1445-2782

history
  Date: Version:
  9 August 2001 Original statement
You are here → 25 January 2008 Archived

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