ATO Interpretative Decision

ATO ID 2004/726 (Withdrawn)

Goods and Services Tax

GST and choosing to apply the margin scheme on a supply of a fractional interest in 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This ATO ID is withdrawn as it is superseded by Goods and Services Tax Ruling GSTR 2006/8.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Status of this decision: Decision Withdrawn 24 August 2007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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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, an individual who owns a fractional interest in land as a tenant in common, choose to apply the margin scheme under section 75-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act), when it sells its fractional interest in the land?

Decision

Yes, the entity may choose to apply the margin scheme under section 75-5 of the GST Act when it sells its fractional interest in the land that it owns as a tenant in common.

Facts

The entity is an individual who owns a fractional interest in land as a tenant in common.

The entity and another individual (the co-owner) acquired the land before 1 July 2000. The entity is now selling its fractional interest in the land.

The entity is registered for goods and services tax (GST) and the entity's supply of its fractional interest in the land is a taxable supply under section 9-5 of the GST Act.

Reasons for Decision

Subsection 75-5(1) of the GST Act provides that where 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 payable on the supply.

The entity's supply of its fractional interest in the land is a taxable supply under section 9-5 of the GST Act.

The nature of the interest held by a tenant in common was considered by the High Court in Nullagine Investments Pty Ltd v. Western Australian Club Inc (1993) 177 CLR 635 where Brennan J expressed that an interest held in land by a tenant in common is a freehold interest in land.

As such, when the entity sells its fractional interest in the land, the entity is selling a freehold interest in land and satisfies the requirement of subsection 75-5(1) of the GST Act.

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.

The entity and the co-owner acquired the land before 1 July 2000. As this was before GST legislation was introduced, the entity's acquisition was not through a taxable supply and subsection 75-5(2) of the GST Act does not exclude the entity from choosing to apply the margin scheme.

Therefore, the entity may choose to apply the margin scheme under section 75-5 of the GST Act when it sells its fractional interest in the land.

Note. Two or more persons may own a stratum unit or a long-term lease jointly. For the purposes of the GST Act, if an entity makes a taxable supply of real property by selling its fractional interest in a stratum unit or granting or selling its fractional interest in a long-term lease, the supply would be considered to fall within subsection 75-5(1) of the GST Act.

Date of decision: 1 August 2003

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

Case References:
Nullagine Investments Pty Ltd v. Western Australian Club Inc
(1993) 177 CLR 635

Wright v. Gibbons
(1949) 78 CLR 313

Keywords
Goods and services tax
GST property & construction
GST margin scheme

Business Line: GST

Date of publication: 3 September 2004

ISSN: 1445-2782

history

	Date:	Version:
	1 August 2003	Original statement
You are here →	24 August 2007	Archived

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