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Edited version of private advice
Authorisation Number: 1051533741917
Date of advice: 2 July 2019
Ruling
Subject: GST and the margin scheme
Question
Can you calculate the margin on the supply of your parcel of vacant land (the Property) using the valuation method specified under subsection 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) such that the margin is the amount by which the consideration for the supply exceeds the approved valuation of the Property on the date of effect of your GST registration, or the day on which you applied for GST registration (if it is earlier)?
All further legislative references are to the GST Act unless stated otherwise.
Answer
Yes, you can calculate the margin on your supply of the Property using the valuation method specified under subsection 75-10(3) such that the margin is the amount by which the consideration for the supply exceeds the approved valuation of the Property on the date of effect of your GST registration, or the day on which you applied for GST registration (if it is earlier). This is because item 2 in the table to subsection 75-10(3) will be applicable in the circumstances of this case on the basis that an approved valuation of the Property will have been made on the date of effect of your GST registration, or the day on which you applied for GST registration (if it is earlier).
Relevant facts and circumstances
You hold a single asset being a parcel of land in close proximity to railway access (the Property). The Property was purchased by pre-GST with no buildings or other structures on the Property.
You have been maintaining the Property and you now propose to sell it at a profit.
You carry on the enterprise of selling real estate.
You intend to apply the valuation method of calculating the GST liability on the proposed sale of the Property.
You purchased the Property prior to the introduction of GST, and the seller did not apply the margin scheme when selling the Property to you.
The requirements for the supply of the Property to be eligible for the margin scheme under the GST Act are satisfied, or will be satisfied in full. The conditions under the GST Act which deem supplies acquired as ineligible for the margin scheme are not applicable in this case.
As advised, you have never been registered for GST as no taxable supplies have been generated from the Property.
You have not carried out any improvements, nor undertaken any development activities such as subdivision on the Property.
You have incurred holding costs on the Property and some legal expenses in relation to settling a property dispute.
The holding costs relating to the Property were incurred on an annual basis from the date of acquisition. The legal fees were incurred in the 20XX and 20YY financial years.
The holding costs incurred were as follows:
· Insurance
· Land Tax
· Professional Fees
· Council Rates
· Maintenance
Legal costs were incurred in respect of a lengthy legal process in contesting access rights via an adjoining property to the Property.
Your expenses are met by the unitholders providing the funding to you in equal proportions.
You hold the Property as an investment. You have recently commenced negotiations to sell the Property to a property developer that owns an adjoining property. You intend to apply the margin scheme in respect of this sale transaction.
Due to the fact that the Property was purchased pre-GST by the parents of the current interested parties no purchase contract could be located. Therefore a copy of the contract in respect of your purchase of the Property has not been provided to the ATO.
You have been in casual negotiations with a major property developer who owns the adjacent land, and who has shown an interest in purchasing the Property. As the negotiations are ongoing, a copy of a sale contract has not been provided to the ATO.
As such, this private ruling does not take into account any contractual terms contained or may be contained in the contract of purchase or contract of sale.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 - subsection 75-10(3)