1012582077752 | Legal database

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Edited version of your private ruling

Authorisation Number: 1012582077752

Ruling

Subject: Valuation date for applying the margin scheme

Question

Will the Commissioner accept a market valuation of the land obtained prior to the date of the transaction as an approved valuation under section 75-35 of the GST Act in a situation where section 75-13 of the GST Act applies?

Answer

No. The Commissioner will not accept a market valuation of the land obtained prior to the date of the transaction as an approved valuation under section 75-35 of the GST Act in a situation where section 75-13 of the GST Act applies.

Relevant facts and circumstances

· You are a property developer.

· You are registered for the goods and services tax (GST).

· You purchased a vacant block of land from an unrelated third party in 200X.

· The property was supplied to you as part of a larger GST-free going concern under section 38-325 of the GST Act.

· A market valuation of the property was obtained at the time of the acquisition.

· You transferred the property to an associate for $Y.

· You obtained a further valuation of the property, for financing purposes, a few months before you supplied the property to an associate.

· You transferred the property to the associate for $Y.

· You and the purchaser are 'associates' in accordance with the meaning given to that term in section 318 of the Income Tax Assessment Act 1936.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 75-13

A New Tax System (Goods and Services Tax) Act 1999 section 75-35

Reasons for decision

Section 75-13 of the GST Act states that:

In working out the *margin for a *taxable supply of *real property you make to an entity who is your *associate at the time of the supply, treat the * consideration for the supply (whether or not the supply was for consideration) as if it were the same as the *GST inclusive market value of the interest, unit or lease at the time of the supply.

(Terms marked with an asterisk are defined in section 195-5 of the GST Act)

In this case you supplied the property to an associate for $Y. Section 75-13 of the GST Act requires you to treat the consideration for the supply as if it was the same as the GST inclusive market value of the property.

Section 75-35 of the GST Act states:

(1) The Commissioner may, by legislative instrument, determine in writing requirements for making valuations for the purpose of this Division.

(2) A valuation made in accordance with those requirements is an approved valuation.

The Commissioner has, by legislative instrument, determined the requirements for making valuations for the purpose of Division 75. This determination is A New Tax System (Goods and Services Tax) Act 1999 Margin Scheme Valuation Requirements Determination MSV 2009/1 (MSV 2009/1).

The appropriate valuation method in your case is Method 1 given in MSV 2009/1. Paragraph 13(3) of MSV 2009/1 states that "the valuation must determine the market value of the interest, unit or lease at the valuation date". Under section 75-13 of the GST Act, the market value must be at the time of the supply and, therefore, the date of the supply is the valuation date.

In your case the valuation you obtain was dated a few months before the date of the supply. Therefore, it is not the correct valuation date.

There is no provision for the Commissioner to approve a valuation date as provided in the legislation. Therefore, you must use an approved valuation provided by a professional valuer as the value of the property as at the date of the supply.

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