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ATO Interpretative Decision

ATO ID 2003/1174 (Withdrawn)

Goods and Services Tax

GST and choosing to apply the margin scheme on a supply of a separately titled residential unit and a separately strata titled car space
FOI status: may be released
  • This ATO ID is withdrawn as it is superseded by GSTR 2006/7, GSTR 2006/8 and issue 15.4.19 of the Property and Construction Industry Partnership Issues Register.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 16 April 2010
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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, choose to apply the margin scheme under section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to both components of a sale, being a strata titled residential unit and a separately strata titled car space, when they are sold under the one contract and the strata titled car space was acquired through a taxable supply on which the goods and services tax (GST) was worked out without applying the margin scheme?

Decision

No, the entity cannot choose to apply the margin scheme under section 75-5 of the GST Act to both components of a sale, being a strata titled residential unit and a separately strata titled car space, when they are sold under the one contract.

The entity cannot choose to apply the margin scheme on the component of the sale that relates to the separately strata titled car space as it was acquired through a taxable supply on which the GST was worked out without applying the margin scheme.

Facts

The entity is a property developer. The entity is selling its freehold interest in a strata titled residential unit (residential unit) and a separately strata titled car space (car space), under the one contract, for a single price. The sale contract includes reference to both the residential unit and the car space.

The supply of the residential unit is a taxable supply of new residential premises. The car space is supplied as part of the residential unit and takes on the same character of new residential premises.

The entity acquired the freehold interest in the residential unit prior to 1 July 2000. The entity acquired the car space after 1 July 2000 as a taxable supply on which GST was worked out without applying the margin scheme.

The sale of the residential unit with the car space is two separate supplies for the purposes of the GST Act.

The entity is registered for GST and the entity's sale of the residential unit with the car space comprises two separate taxable supplies under section 9-5 of the GST Act.

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
•
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.

The entity is selling its freehold interest in a residential unit and a car space, under the one contract, for a single price. Therefore, the requirements of subsection 75-5(1) of the GST Act are satisfied.

However, subsection 75-5(2) of the GST Act, provides that 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.

When the entity sells the residential unit with a car space, it makes two separate supplies for the purposes of the GST Act. The residential unit was acquired prior to 1 July 2000 and the introduction of GST. As such, the acquisition of the residential unit was not by way of a taxable supply on which the GST was worked out without applying the margin scheme. Therefore, subsection 75-5(2) of the GST Act does not exclude the entity from choosing to apply the margin scheme to the component of the sale that refers to the residential unit.

The entity acquired the car space after 1 July 2000 as a taxable supply on which GST was worked out without applying the margin scheme. As such, subsection 75-5(2) of the GST Act does exclude the entity from choosing to apply the margin scheme to the component of the sale that refers to the car space.

Therefore, the entity cannot choose to apply the margin scheme under section 75-5 of the GST Act to both components of a sale, being a strata titled residential unit and a separately strata titled car space, when they are sold under the one contract.

The entity can choose to apply the margin scheme under section 75-5 of the GST Act on the component of the sale that relates to the strata titled residential unit.

The entity cannot choose to apply the margin scheme under section 75-5 of the GST Act on the component of the sale that relates to the separately strata titled car space as it was acquired through a taxable supply on which the GST was worked out without applying the margin scheme.

Note: 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 1/11th of the margin for the supply. Subsection 75-10(3) of the GST Act provides that, where the real property was acquired before 1 July 2000 and a valuation has been undertaken that complies with any requirements determined by the Commissioner, the margin for the supply is the amount by which the consideration for the supply (sale price) exceeds the valuation of the freehold interest in the land.

Date of decision:  22 September 2003

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 40-75(1)
   subsection 75-5(1)
   subsection 75-10(1)
   subsection 75-10(3)

Keywords
Goods and services tax
GST property & construction
GST margin scheme
GST sale of real property
GST supplies & acquisitions
Taxable supply

Business Line:  GST

Date of publication:  24 December 2003

ISSN: 1445-2782

history
  Date: Version:
  22 September 2003 Original statement
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