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This edited version has been archived due to the length of time since original publication.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: 1012972923190

Date of advice: 18 February 2016

Ruling

Subject: GST and the supply of real property under the margin scheme.

Question

Are you, Entity A entitled to apply the margin scheme under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 to calculate your GST liability on the sale of the new residential premises which you are constructing in Australia?

Answer

Yes

Relevant facts and circumstances

You, Entity A registered for GST on ddmmyyyy. Between mmyyyy and mmyyyy you acquired X lots of land containing commercial premises. Each acquisition was as a GST free going concern.

The vendor of each of these premises had initially acquired them before 1 July 2000. There was a commercial lease in place at the time of each purchase and the premises were tenanted.

You plan to consolidate the Lots, demolish the existing premises and construct a mixed residential and commercial complex on the Lots. The development approval was issued on ddmmyyyy. The approval is for a complex that will contain:

    • X three or more bedroom (bdrm) dwellings

    • Y, two bdrm dwellings

    • Z, one bdrm dwellings

    • XX sqm of commercial retail space

    • YY sqm of commercial office space.

You plan to sell the newly constructed residential premises under the margin scheme if the supplies are eligible.

The contract for sale will include a written agreement between yourself and the purchaser that the margin scheme is to apply.

You are not part of a GST Group.

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 75-5.

Reasons for decision

In this reasoning, unless otherwise stated,

    • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

    • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act

The sale of new residential premises by a GST registered entity in your circumstances will be a taxable supply pursuant to section 9-5.

Subsection 75-5(1) provides that the margin scheme applies in working out the amount of GST on a taxable supply of real property that you make by:

      a. Selling a freehold interest in land; or

      b. Selling a stratum unit; or

      c. Granting or selling a long-term lease;

      if you and the recipient of the supply have agreed in writing that the margin scheme is to apply.

However, subsection 75-5(2) provides that the margin scheme does not apply if you acquired the entire freehold interest, stratum unit or long term lease through a supply that was ineligible for the margin scheme. A supply is ineligible for the margin scheme if any of the circumstances set out in subsection 75-5(3) apply.

None of the provisions in 75-5 (3) will apply to make your supplies ineligible.

Therefore, where you agree in writing with the purchaser that the margin scheme is to apply, you will be entitled to apply the margin scheme.

Pursuant to subsection 75-5(1)(A), the agreement must be made on or before the time of the supply, or within such period as the Commissioner allows.


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