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Edited version of your written advice
Authorisation Number: 1012729295094
Ruling
Subject: GST and the Margin Scheme
Question 1
Will the Goods and Services Tax (GST) liability on the supply of Lot xxxx, by Entity A as Trustee for Entity B (Entity A), to Entity C, be calculated by applying a margin scheme valuation under item 2 of the table in subsection 75-10(3)?
Answer
Yes
The supply of Lot xxx by Entity A to Entity C will be a taxable supply to which you may apply the margin scheme pursuant to Division 75 of the GST Act.
Lot xxxx was acquired by Entity A prior to the implementation of GST. Your date of registration for GST purposes was yyyy. Consequently the valuation date for the supply of Lot xxxx under the margin scheme is as outlined in Item 2 of the table in subsection 75-10(3).
Question 2
Will the GST liability on the supply of Lot xxxx be calculated by:
i. Applying a margin scheme valuation under item 2 of the table in subsection 75-10(3) (as it relates to the former Lot xxxx that was acquired before 1 July 2000); and
ii. Utilising the consideration for the acquisition under the normal margin scheme provisions in subsection 75-10(2) (as it relates to the former Lot xxxx that was acquired after 1 July 2000)?
Answer
Yes
The supply of Lot xxxx by Entity A to Entity C will be a taxable supply to which you may apply the margin scheme pursuant to Division 75 of the GST Act.
Section 75-16 of the GST Act applies to supplies of real property acquired through several acquisitions. Accordingly, the following will apply in calculating the margin for the supply of Lot xxxx.
Lot xxxx was acquired prior to the implementation of GST. Your date of registration for GST purposes was yyyy. Consequently, the valuation date for the supply of Lot xxxx under the margin scheme is as outlined in Item 2 of the table in subsection 75-10(3).
Lot xxxx was acquired post implementation of GST. As none of the circumstances specified in an item in the second column of the table in subsection 75-10(3) apply, the margin for the supply of this Lot is worked out under subsection 75-10(2).
Relevant facts and circumstances
Entity A sold the following parcels of land to Entity C:
1. Lot xxxx, being the whole of the land on certificate of title Volume xxxx Folio xxx.
The registered proprietor of this parcel of land is Entity A. Its interest was registered after 1 July 2000.
2. Lot xxxx on Deposited Plan xxxxxx (Lot xxxx), being the whole of the land in certificate of title volume xxxx Folio xxx.
The registered proprietor of this parcel of land is Entity A. Its interest was registered prior to 1 July 2000.
The contract of sale was executed on yyyy.
The total purchase price for the sale of the two parcels is $xx plus any GST applicable (Clause xx of Annexure A to the Contract of Sale).
The parties have agreed that the GST margin scheme, as contained in Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), may apply to the sale of the Lots.
Entity B was registered for GST on yyyy. Entity B was registered by the Commissioner with a date of effect not earlier than four years before the day of the Commissioner's decision with respect to the registration date, pursuant to his powers in subsection 25-10(1A) of the GST Act.
Lot xxxx is the result of the amalgamation of two separate parcels of land. Lot xxxx is comprised of:
i. Lot xxxx on Deposited Plan xxxxx Volume xxxx Folio xxx (Lot xxxx). Entity A acquired this parcel of land prior to 1 July 2000;
ii. Lot xxxx on Deposited Plan xxxxx (Lot xxxx). This parcel of land was Crown land which was transferred to Entity A after 1 July 2000 by order of the relevant Minister pursuant to the relevant State Act. Lot xxxx was transferred to Entity A on payment to the Minister of $xx. The Seller's solicitors have advised that the transfer of Lot xxxx was not treated as a taxable supply and therefore the margin scheme was not applied to this sale.
iii. The amalgamation of Lots xxxx and xxxx took place after 1 July 2000.
Neither Lot xxxx nor former lots xxxx or xxxx were acquired by a taxable supply. That is:
a. Lot xxxx was acquired by Entity A prior to 1 July 2000, prior to the implementation of GST;
b. Lot xxxx was acquired by Entity A prior to 1 July 2000, prior to implementation of GST;
c. Lot xxxx was transferred to Entity A after 1 July 2000 by legislative order pursuant to the relevant State Act.
In yyyy the Commissioner of Taxation made a decision under section 25-10, upon application by Entity B, of the date from which GST registration of Entity B was to take effect. As the date of effect of the registration cannot be a day that is more than four years prior to the day of making the decision, the registration was back dated to yyyy.
Further information
You provided the following additional information:
1. You have confirmed that GST was not applied to the transfer of land, by order of the relevant minister, to Entity A and accordingly no input tax credit was claimed. You have also confirmed that the margin scheme was not applied to the sale. Therefore, the supply by the relevant Minister was not a taxable supply on which the margin scheme was not applied and consequently you advise that the supply to Entity A was not an "ineligible" supply for GST margin scheme purposes.
2. You advise that, as the transaction occurred in yyyy, records of the transaction have not been able to be obtained which document the reason why GST was not applied to the transaction.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5,
A New Tax System (Goods and Services Tax) Act 1999 Section 23-20,
A New Tax System (Goods and Services Tax) Act 1999 Subsection 25-10(1A),
A New Tax System (Goods and Services Tax) Act 1999 Section 75-5,
A New Tax System (Goods and Services Tax) Act 1999 Section 75-10,
A New Tax System (Goods and Services Tax) Act 1999 Section 75-11 and
A New Tax System (Goods and Services Tax) Act 1999 Section 75-16.
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