| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1051229488496
Date of Advice: 29 May 2017
Ruling
Subject: GST and calculation of margin on the supply of residential apartments.
Question
In calculating the amount of GST on taxable supplies of real properties to be made under the margin scheme, how the margin for the supply should be calculated in relation to the following two scenarios:
(1) The supplier was registered for GST at the time of settlement.
(2) The supplier was not registered for GST at the time of settlement.
Answer
Please refer to the reasons for decision on how the margin for the supplies of real properties should be calculated in relation to the two scenarios.
This ruling applies for the following periods:
Not applicable
The scheme commences on:
Not applicable
Relevant facts and circumstances
● The supplier is registered for GST since 1 July 2000 and sold a property to the purchaser.
● The particulars of sale specified that the supply of the Property under the contract of sale was supply of a going concern and the supplier will carry on the going concern enterprise until the day of supply.
● The Property was leased and used as a commercial parking facility by the supplier.
● The contract of sale of the Property states the following:
Ø The sale of the Property is a going concern.
Ø The sale of the Property is subject to lease.
Ø The Property is sold subject to the tenancies.
Ø The purchaser has inspected the tenancies.
Ø The supplier must obtain from the tenant a variation of its lease which shall extend the term to a date which is no earlier than one day after the settlement date.
Ø On the settlement date, the supplier must give the purchaser all the tenancy documents.
Ø Up to and including the settlement date, the supplier must comply with its obligations under the tenancies.
Ø After the settlement date, the purchaser must comply with the supplier's obligations under the tenancies.
● The purchaser carried out a residential apartment development on the Property and 100% of the apartments have been sold with practical completion.
● The contract of sale specified that the margin scheme applied to the contract of sale of all the apartments.
● The purchaser has also completed a commercial development on the ground and first floors of the Property.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 - subsection 75-5(1),(2)&(3)
A New Tax System (Goods and Services Tax) Act 1999 - subsection 75-10(2)&(3)
A New Tax System (Goods and Services Tax) Act 1999 - subsection 75-11(5)
A New Tax System (Goods and Services Tax) Act 1999 - subdivision 38-J
Reasons for decision
The margin scheme is an alternative method by which a supplier is able to calculate the amount of GST payable on a supply of property. Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) outlines the margin scheme.
Scenario 1 - The supplier was registered for GST at the time of settlement
Based on the facts provided the following points need to be considered under scenario 1, to work out the margin for the supply:
Ø The supplier has acquired the Property before 1 July 2000.
Ø The supplier was registered for GST as at 1 July 2000.
Ø If the purchaser chooses to apply an approved valuation to work out the margin for the supply of the residential apartments, the valuation should be as at 1 July 2000.
Ø If the Applicant does not want to apply an approved valuation as at 1 July 2000, then the GST inclusive market value of the Property as at 1 July 2000 should be used to calculate the margin for the supply of the residential apartments.
If,
Ø The suppler has acquired the Property after 1 July 2000; and
Ø The supplier was registered for GST at the time of acquisition; and
Ø The supplier had acquired the Property for consideration; then
Ø If the purchaser chooses to apply an approved valuation to work out the margin for the supply of the residential apartments, the valuation should be on the day which the purchaser acquired the Property.
Ø If the purchaser does not want to apply an approved valuation and the purchaser had acquired the Property for consideration, then the consideration provided by the supplier should be used to calculate the margin for the supply, or.
Ø If the supplier had acquired the Property without consideration and the purchaser does not want to apply an approved valuation, then the GST inclusive market value at the time of acquisition should be used to calculate the margin.
Scenario 2 - The supplier was not registered for GST at the time of settlement
The following points need to be considered under scenario 2, to work out the margin for the supply:
Ø The supplier was not registered for GST as at 1 July 2000.
Ø If the purchaser chooses to apply an approved valuation to work out the margin for the supply of the residential apartments, the valuation should be the day as at the first day on which the supplier was registered or required to be registered.
Ø If the purchaser does not want to apply an approved valuation, then the GST inclusive market value of the Property as at the first day on which the supplier was registered or required to be registered, should be used.
Please note that Item 2, subsection 75-10(3) of the GST Act may apply to scenario 2 if the supplier had acquired the property before 1 July 2000 and does not become registered or required to be registered until after 1 July 2000.
As explained above, if the supplier was not registered nor required to be registered for GST at the time of settlement then subsection 75-10(2) of the GST Act would apply to work out the margin for the supply.