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Edited version of private advice
Authorisation Number: 1051844489679
Date of advice: 27 May 2021
Ruling
Subject: Goods and services tax and the margin scheme
Question
Can you choose to apply the margin scheme, under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), on the sale of the Unit on the Property?
Answer
As the sale has not settled yet you may choose to apply the margin scheme subject to you meeting the requirements of Division 75 of the GST Act.
Relevant facts and circumstances
You have been registered for goods and services tax (GST) since ddmmyyyy. You are mainly carrying on a residential property development enterprise.
You purchased a Property on ddmmyyyy. You provided X consideration for the acquisition of the property. The supply of the property was an input taxed supply. There was a house on the property when you acquired it.
You were not a member of a GST group at the time you acquired the property. You were never a participant in a GST joint venture.
You subsequently demolished the house. You subdivided the property and built X units.
All units were built for residential accommodation with physical characteristics including bedroom(s), bathroom(s), toilet(s) and kitchen. They provide basic living facilities and shelter.
You intend to sell one of the units. The supply of the Unit will be for consideration. The supply of the Unit will be made in the course or furtherance of the property development enterprise that you carry on. You will still be registered for GST at the time the sale of the Unit settles.
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 subsection 75-5
Reasons for decision
In this ruling:
- unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
- all terms marked by an *asterisk are defined terms in the GST Act
- all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au
You can choose to apply the margin scheme if, among other things;
- you did not acquire the entire freehold interest through a supply that was *ineligible for the margin scheme
- your supply of the Unit will be a taxable supply and
- you and the recipient have agreed in writing that the margin scheme is to apply on or before the making of the supply or within such further period as the Commissioner allows.
Supply that was ineligible for the margin scheme
The term 'ineligible for the margin scheme' has the meaning given by subsections 75-5(3) and (4). You did not acquire the entire freehold interest through a supply that was *ineligible for the margin scheme based on the information provided.
Taxable supply
Under section 9-5, you make a *taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with the indirect tax zone, and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
The sale of the Unit is not GST-free nor input taxed under the GST Act. Therefore, the sale is not excluded from being a taxable supply on account of it being GST-free or input taxed.
The supply of the Unit will be for consideration. The supply of the Unit will be made in the course or furtherance of the property development enterprise that you carry on. The Unit is located in Australia and therefore connected with the indirect tax zone. You will still be registered for GST at the time the sale of the Unit settles.
Accordingly, the supply of the Unit is a taxable supply under section 9-5.
Conclusion
Where you have put in place an agreement in writing prior to settlement you may apply the margin scheme to your supply of X.
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