Edited version of private ruling

Authorisation Number: 1011833827625

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Ruling

Subject: GST and sale of property

Issues:

Can the commissioner confirm the extent to which the sale of the property by the trustee for the trust will be a taxable supply and the extent to which the sale will be input taxed?

To the extent that the sale of the property is a taxable supply, can the Commissioner confirm the calculation of GST payable on the sale under the margin scheme pursuant to Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advices:

The property will be input taxed to the extent of AA% and taxable to the extent of BB%.

See reasoning below.

The calculation of GST payable on the sale under the margin scheme is as explained in reasons for decisions (see question 2 below).

Relevant facts:

You are registered for GST.

Your enterprise includes the activity associated with the buying and selling of real properties.

You acquired a property under the margin scheme.

The property consists of a residential premises and a commercial property...

You acquired the property with vacant possession for $HHH and will on-sell the property with vacant possession for $CCC.

You have not carried out any works on the property since it was acquired. The residential premises remains capable of occupation as residential premises and is not the subject of any demolition order.

The residential premise on the property fully satisfies the description of residential premises and physically contains all of the facilities that are necessary for residential accommodation.

The residential premises is not 'new residential premises'..

You entered into a contract to sell the property.

The apportionment basis for the input taxed part of the supply to the taxable part of the supply is AA% and BB%.

The parties have also agreed that the margin scheme applies to the extent that the contract results in a taxable supply.

Reasons for decision

Question 1

Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8) provides guidance on apportioning the consideration for a supply that includes taxable and non-taxable parts. Paragraph 117 of GSTR 2001/8 mentions that section 9-80 of the GST Act provides the method for working out the value of the taxable part of a mixed supply. The section refers to such a supply as the actual supply and provides a formula to work out the value of the actual supply.

Subsection 9-80(1) of the GST Act provides that if a supply (the actual supply) is:

· partly a taxable supply, and

· partly a supply that is GST-free or input taxed,

the value of the part of the actual supply that is a taxable supply is the proportion of the value of the actual supply that the taxable supply represents.

A supply that is partly taxable and partly GST-free or input taxed is referred to as a mixed supply.

In your case, the property consists of a residential premises and a commercial property each of these parts are sufficient enough in their own right to be regarded as separately identifiable parts and not as integral, ancillary or incidental to each other. Accordingly, it is a mixed supply and it is necessary to identify which parts are taxable and non-taxable.

Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case, you make the supply for consideration, in the course or furtherance of your enterprise, the supply is connected with Australia and you are registered for GST. Therefore, the supply of the property satisfies all of the positive limbs of section 9-5 of the GST Act and your supply of the property is a taxable supply unless the separate parts of the property are identified as GST-free or input taxed.

You informed that the residential premises:

· is not a new residential premises and you have not carried out any works on the property since it was acquired;

· remains capable of occupation as residential premises and are not the subject of any demolition order by the Council or any other order that would prevent residential occupation.

You have not carried out any works on the property since it was acquired. It was not a new residential premise.

You further submit that the residential premise is situated in its own defined area.

The apportionment basis for the input taxed part of the supply to the taxable part of the supply is AA% and BB%.

Therefore, we consider that you are making a mixed supply.

Calculating the GST payable on the taxable part of a mixed supply

The legislation specifies the valuation method to calculate the taxable value of a mixed supply in subsection 9-80(2) of the GST Act.

Subsection 9-80(2) of the GST Act provides that the value of the actual supply for the purposes of subsection 9-80(1) of the GST Act is as follows:

(Price of the supply * 10) / (10 + Taxable proportion)

Where:

taxable proportion is the proportion of the value of the actual supply that represents the value of the taxable supply (expressed as a number between 0 and 1).

From the facts provided, price is $CCC, taxable proportion is BB%. The value of the actual supply is worked out as:

(Price of the supply * 10) / (10 + Taxable proportion)

= ($CCC x 10) / 10 + 0.BB

= $CCC0 / 10.BB

= $DDD

Hence, the value of the taxable part is $DDD x 0.BB= $EEE

GST payable will be 10% on the value, which is $FFF.

That gives a price of $GGG.

As such, the taxable portion is $GGG according to subsection 9-80(2) of the GST Act.

Question 2

According to subsection 75-10(1) of the GST Act, if a taxable supply of real property is under the margin scheme, the amount of the GST on the supply is 1/11 of the margin for the supply.

Subsection 75-10(2) of the GST Act provides that subject to subsection (3) and section 75-11, the margin for the supply is the amount by which the consideration for the supply exceeds the consideration for your acquisition of the interest, unit or lease in question.

In your case, the price or consideration for taxable supply portion is $GGG according to question 1 above.

The price or consideration for your acquisition is $HHH. The relevant taxable portion according to subsection 9-80(2) of the GST Act is:

The value of the actual acquisition is:

(Price of the supply * 10) / (10 + Taxable proportion)

= ($HHH x 10) / 10 + 0.BB

= $HHH0 / 10.BB

= $JJJ

Hence, the value of the taxable part is $JJJ x 0.BB = $KKK

Price for taxable acquisition = $KKK + 10% GST = $LLL

Consequently, the margin is $GGG - $LLL = $MMM according to subsection 75-10(2) of the GST Act.

GST payable will be 1/11 of $MMM = $NNN according to subsection 75-10(1) of the GST Act.

Accordingly, the GST payable on the sale of the property under the margin scheme pursuant to Division 75 of the GST Act is $NNN.