Edited version of private advice

Authorisation Number: 1052151926491

Date of advice: 21 August 2023

Ruling

Subject: GST - property

In this ruling, unless otherwise stated, the expressions 'you/'your' and 'ABC' refer to ABC Pty Ltd and are used interchangeably.

Question1

When you, ABC, sell each of the new residential apartments located at < specified address > (the Properties), will you be eligible to apply the margin scheme in working out the amount of GST payable on each supply under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?

Answer

Yes, the Commissioner of Taxation (the Commissioner) considers that pursuant to Division 75 of the GST Act, when you sell each of the Properties you will you be eligible to apply the margin scheme in working out the amount of GST payable on each supply.

This is provided that

(i)         the supply is a taxable supply (The facts state that a taxable supply is intended to be made)

(ii)        ABC and the purchaser have agreed in writing, generally before the making of the supply, that the margin scheme is to apply.

Question 2

If the answer to Question 1 is 'yes', can you choose to apply an approved valuation to work out the margin for the supply under subparagraph 75-11(5)(e)(i) of the GST Act with the applicable date of valuation being as at DDMMYYYY?

Answer

Yes, ABC can choose to apply an approved valuation to work out the margin for the supply under subparagraph 75-11(5)(e)(i) of the GST Act.

We consider the facts of your case indicate that paragraphs 75-11(5)(a)(i),(b) and (c) were satisfied. In considering paragraph 75-11(5)(e), we have taken into account the following:

•         ABC acquired the property located at < address > (the Property) from < XYZ > (the Original Vendor).

•         The Original Vendor had acquired the Property in MMYYYY (that is, acquired after 1 July 2000)

•         The Original Vendor was registered for GST since DDMMYYYY (that is, registered for GST at the time of its acquisition of the Property in MMYYYY)

•         The Original Vendor's acquisition of the Property was for the purchase price of $X (that is, the acquisition was for consideration)

Accordingly, the Commissioner considers the requirements specified in paragraph 75-11(5)(e)(i) were satisfied and ABC can choose to apply an approved valuation to work out the margin for the supply.

The marginfor the supplies that ABC make in relation to the new residential apartments will be the amount by which the consideration for the supplies exceeds the approved valuation of the Property as at the day on which the Original Vendor had acquired it (that is, DDMMYYYY).

Additional information

Where ABC has an approved valuation, ABC will need to apportion the valuation of the Property to ascertain the part of the valuation that relates to each of the new residential premises using a fair and reasonable method of apportionment.

This ruling applies for the following period:

Years ended 30 June YYYY to 30 June YYYY

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

1.         ABC is a subsidiary of a global group which is head quartered in < Country >.

(i)        ABC was incorporated on DDMMYYYY and has operated in Australia since this time predominately focused on residential developments.

(ii)       Under ABN #, ABC is registered for GST and has been since DDMMYYYY.

2.         On DDMMYYYY, ABC applied to the Commissioner of Taxation (the "Commissioner") for a private ruling on the following:

Question 1

When you, ABC, sell each of the new residential apartments located at < address > (the Properties), will you be eligible to apply the margin scheme in working out the amount of GST payable on each supply under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?

Question 2

If the answer to Question 1 is 'yes', can you choose to apply an approved valuation to work out the margin for the supply under subparagraph 75-11(5)(e)(i) of the GST Act with the applicable date of valuation being as at DDMMYYYY?

Question 3

If the answer to question 2 is 'yes', is the valuation you have obtained considered to be an 'approved valuation' pursuant to section 75-35 of the GST Act?

On DDMMYYYY, ABC requested the private ruling be issued covering the first two questions only and question 3 to be answered separately at a later date.

3.         ABC acquired the property located at < address > [Certificate of Title Volume # Folio # (the "Property"). The details of the transaction include the following:

(i)        The Contract of Sale of Real Estate (the "Sale Contract") was executed on DDMMYYYY, and the sale/purchase settled on DDMMYYYY.

(ii)       The purchase price for the Property was $X. The Property was supplied as a GST-free supply of a going concern. This was agreed in writing between the parties as part of the Sale Contract.

(iii)      The relevant enterprise supplied as part of the going concern was a leasing enterprise. That is, the Property was being used as commercial premises and supplied subject to the leases as shown in the table below.

The above leases represented all of the lettable area of the Property. That is, there were no vacant areas of the Property that were not being leased as at the time of settlement.

4.         The vendor was XYZ (the "Original Vendor").

(i)        The Original Vendor (ABN: #) is registered for GST and has been since DDMMYYYY.

(ii)       The Original Vendor had acquired the Property for a purchase price of $X pursuant to a contract dated DDMMYYYY. The settlement date was DDMMYYYY.

(iii)      The Property was supplied to the Original Vendor as a GST-free supply of a going concern.

5.         ABC acquired the Property with the intention of undertaking a development that is currently anticipated to comprise of approximately XX number of new residential apartments as well as some retail facilities (the "Development").

6.         As part of the Development feasibility, ABC engaged VVV (the "Valuer") to provide a market valuation of the Property. The details of this engagement include the following:

(i)        On DDMMYYYY, the Valuer reported that the market value of the Property as at DDMMYYYY was $X (exclusive of GST).

(ii)       On DDMMYYYY, the Valuer reported in an addendum that the market value of the Property as at DDMMYYYY was $X (GST exclusive).

(iii)      On DDMMYYYY, ABC requested the Commissioner to source an independent valuer to undertake a review of the valuation prepared by the Valuer.

7.         ABC and the Original Vendor are unrelated parties and for the avoidance of doubt are not 'associates' nor have ever been members of the same GST group or participants in a GST joint venture.

8.         ABC confirms as a fact that a taxable supply is intended to be made in relation to the sale of each of the new residential apartments once developed.

9.         Where eligible to be applied, ABC intends to agree in writing with each prospective purchaser to calculate the GST liability on the supply of the new residential premises under the margin scheme.

10.      Where required, ABC will apportion the valuation for the Property to individual sales of new residential premises in the Development using a fair and reasonable method of apportionment.

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 Division 75

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-J

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Further issues for you to consider

Whether the valuation you have obtained is an approved valuation pursuant to section 75-35 of the GST Act.

You have requested the Commissioner to source an independent valuer to undertake a review of the valuation prepared by < name of the Valuer >. The Commissioner is in the process of engaging an external valuer.

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