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Edited version of your written advice
Authorisation Number: 1051502034501
Ruling
Subject: GST and the margin scheme
Question 1
Is entity X entitled to use the margin scheme in respect of the sales of stratum units?
Answer
Yes, entity X is entitled to use the margin scheme in respect of the sales of the stratum units.
Question 2
Is the margin for the supply made by entity X determined under subsection 75-11(5) of the GST Act?
Answer
Yes, the margin for the supply made by entity X is determined under subsection 75-11(5) of the GST Act. Accordingly the Commissioner accepts that entity X can determine its margin using either subparagraph 75-11(5)(e)(i) or subparagraph 75-11(5)(e)(ii) of the GST Act.
Question 3
Is the proposed apportionment method outlined in the facts considered to be a fair and reasonable methodology for the purposes of calculating the margin on each stratum unit when it is sold?
Answer
Yes, the proposed apportionment method (that uses area as the basis of apportionment) is considered to be a fair and reasonable method for the purposes of calculating the margin on each stratum unit when it is sold.
This ruling applies for the following periods:
1 June 2017 till quarter ending 30 June 2021
The scheme commences on:
1 June 2017
Relevant facts and circumstances
Entity X has been registered for GST at all times since 2013.
In 2013 entity X entered into a Contract to purchase property (the Property). The supply of the Property under the Contract of Sale is a GST-free going concern. A copy of the Contract of Sale has been provided as part of this request.
The vendor under the Contract of Sale was entity A. Entity A was registered for GST at all relevant times.
The GST supply to entity X was settled in late 2013.
Entity A had purchased the Property from Entity B sometime after 9 December 2008.
The solicitors for Entity A have advised that Entity A acquired the property as a GST-free supply of a going concern.
The cost to Entity A of the Property has been identifies with the consideration being $Y.
Entity X is redeveloping the Property into a complex comprising a hotel component and a residential apartment component.
Entity X has entered into contracts for a number of off-the-plan sales of stratum units in the residential apartment component of the property. Under the terms of these contracts entity X and the relevant purchaser have agreed in writing that the transactions are subject to the margin scheme.
Entity X may enter into further contracts for the sale of other stratum units in the property in which the parties may elect to use the margin scheme.
Apportionment method
There are two strata plans for the Property, one for a hotel component and the other for residential apartments. It is proposed that entity X will:
Step 1: Apportion the $Y between the hotel strata plan and the apartment strata plan using the Gross Floor Area according to the Development Consent granted for the project.
Step 2: Using the results from Step 1, entity X will use the area of each lot in the final apartment strata plan to apportion the amount that is to be applied to each apartment sale.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 75-5
A New Tax System (Goods and Services Tax) Act 1999 Section 75-10
A New Tax System (Goods and Services Tax) Act 1999 Section 75-11