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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012829431436

Date of advice: 25 June 2015

Ruling

Subject: GST and managed investment scheme

Question 1

Can you claim 100% input tax credits (ITC) on expenses incurred on the construction of new residential premises designated for sale?

Answer

Yes, you can claim 100% ITC on expenses incurred on the construction of new residential premises designated for sale.

Question 2

Can you use the margin scheme on the sale of a property acquired with no GST in the purchase price?

Answer

Yes, you can use the margin scheme on the sale of a property acquired with no GST in the purchase price.

Question 3

Where land purchased contained an old residential property which has been cleared in order to construct a duplex for sale, are you allowed to claim ITC on the expenses incurred in running your enterprise.

Answer

Yes, you can claim ITC on the expenses incurred in running your enterprise provided the expenses satisfied section 11-5 of the GST Act.

Also see answer to question 1.

This ruling applies for the following periods:

The scheme commences on:

Relevant facts and circumstances

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

You are engaged in buying, developing, constructing and selling both residential and commercial properties.

You incur costs in the carrying on of your enterprise.

All the fees mentioned above relate to your carrying on of your enterprise

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 sections 11-5 & 11-20, subsections 40-65(1) & 40-75(2).

Reasons for decision

New residential premises

Subsection 40-65(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the sale of residential premises is an input taxed supply.

However, subsection 40-65(2) of the GST Act excludes the supply of new residential premises from being an input taxed supply.

Among other things subsection 40-75(1) of the GST Act defines residential premises as new residential premises where they have not previously been sold as residential premises.

Subsection 40-75(2) of the GST Act provides that premises are not new residential premises if they have been used for a period of at least five years to make input taxed supplies of residential premises by way of lease, hire or licence under section 40-35 of the GST Act.

Creditable acquisition and input tax credits

Under section 11-20 of the GST Act an entity is entitled to an input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

    • it acquires anything solely or partly for a creditable purpose;

    • the supply of the thing to it is a taxable supply

    • it provides, or is liable to provide, consideration for the supply, and

    • it is registered, or required to be registered for GST.

Under subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise.

If in the carrying on of your enterprise you incur expenses relating to the construction of new residential premises designated for sale and all the conditions under section 11-5 of the GST Act are satisfied then you are entitled to claim full input tax credits as your acquisitions are fully creditable.

Question 2

Summary

Yes, you can use the margin scheme on the sale of a property acquired with no GST in the purchase price.

Detailed reasoning

Under subsection 75-5(1) of the GST Act the margin scheme may only apply in working out the amount of GST on a taxable supply of real property if the supplier and recipient of the supply have agreed in writing that the margin scheme is to apply to the supply. The agreement must be made on or before the making of the supply, or within such further period as the Commissioner allows.

Other than satisfying the requirement of the written agreement, to apply the margin scheme you must be making a taxable supply by:

    • selling a freehold interest in land;

    • selling a stratum unit; or

    • supplying a long term lease.

However, you will not be able to use the margin scheme if you are selling real property that you acquired through a taxable sale on which the margin scheme was not used;

Therefore, the margin scheme can be used on the sale of a property acquired with no GST in the purchase price.

Question 3

Summary

Yes, you can claim ITC on the expenses incurred in running your enterprise provided the expenses satisfied section 11-5 of the GST Act.

Detailed reasoning

See answer to question 1 under the heading creditable acquisition and input tax credits.


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