ATO Interpretative Decision

ATO ID 2001/633 (Withdrawn)

Goods and Services Tax

GST and calculation of margin scheme to include money paid to develop the land
FOI status: may be released

This ATO ID is withdrawn as it is superseded by Goods and Services Tax Ruling GSTR 2006/8.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Status of this decision: Decision Withdrawn 24 August 2007

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 money paid to develop the land when calculating the margin under subsection 75-10(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision

No, the entity cannot include money paid to develop the land when calculating the margin under subsection 75-10(2) of the GST Act.

Facts

The entity is a property developer. The entity acquired the land for $30,000 after 1 July 2000 (contract price). It was acquired through a taxable supply where goods and services tax (GST) was calculated using the margin scheme. The entity then developed it and built a house on it. The entity paid consideration to other suppliers for developments that were performed on the land.

The entity is making a taxable supply under section 9-5 of the GST Act of new residential premises.

The entity meets the requirements to be able to choose to apply the margin scheme under section 75-5 of the GST Act. The entity chooses to apply the margin scheme to the sale of the property.

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 payable on the supply is 1/11th of the margin for the supply.

Under subsection 75-10(2) of the GST Act, 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.

'Acquisition' is defined in section 195-1 of the GST Act as having the meaning given by section 11-10 of the GST Act.

Section 11-10 of the GST Act provides that an 'acquisition' is to be any form of acquisition whatsoever and provides that it includes:

•: an acquisition of goods;
•: an acquisition of services;
•: a receipt of advice or information;
•: an acceptance of a grant, assignment or surrender of real property.

Therefore, it is only the consideration provided by the entity to the supplier of the property that is the consideration for the acquisition of the interest in the property. The monies paid for other supplies in relation to the development of the property are consideration for acquisitions other than an acquisition of the interest in the property.

The consideration provided by the entity to the supplier of the land was $30,000. Therefore, the consideration for the entity's acquisition of the interest in the property is $30,000. As such, the entity cannot calculate the margin under subsection 75-10(2) of the GST Act by including the money paid to develop the land.

[Note: Under subsection 11-20 of the GST Act, the entity is entitled to claim input tax credits for all creditable acquisitions used to develop the land.]

Date of decision: 23 July 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-10
   section 11-20
   section 75-5
   subsection 75-10(1)
   subsection 75-10(2)
   section 195-1

Keywords
Goods & services tax
GST property & construction
GST margin scheme
GST supplies & acquisitions

Business Line: Goods and Services Tax

Date of publication: 29 November 2001

ISSN: 1445-2782

history

	Date:	Version:
	23 July 2001	Original statement
You are here →	24 August 2007	Archived

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