Edited version of private advice

Authorisation Number: 1051924744866

Date of advice: 22 November 2021

Ruling

Subject: GST and margin scheme

Question

Under Division 75 of the A New Tax system (Goods and Services Tax) Act 1999 (the GST Act) were you, the named entity, eligible to apply the margin scheme in working out the amount of GST on your supply of X number of specified structures located at the specified address (the Structures) and where you were eligible to apply the margin scheme, what is the margin for the supply?

Answer

Under Division 75 of the GST Act you were eligible to apply the margin scheme in working out the amount of GST on your supply of the Structures as you did not acquire the relevant Structures through a supply that was ineligible for the margin scheme and none of the other circumstances described in subsection 75-5(3) applies to your acquisition. This is provided each of the purchasers and you have agreed in writing that the margin scheme is to apply.

The margin for the supply of each of the Structures is the amount by which the consideration for the supply exceeds the GST inclusive market value of the relevant Structure as at the date of registration of the new strata plan of subdivision being ddmmyyyy.

This ruling applies for the following period:

1 July XXXX to 31 March XXXX

The scheme commences on:

1 July XXXX

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Note: in this ruling the expressions you, the named entity, the Plan and the Owners Corporation refer to the same entity and are used interchangeably.

You, the named entity (the Plan), are the Owners Corporation for a strata scheme constituted under the specified Act for the specified address (the Property). The strata scheme was established and registered in the relevant State in XXXX.

The Plan is registered for GST from ddmmyyyy. The Plan carries on an enterprise of managing the strata scheme as well as managing and maintaining the building and common property of the strata scheme. The Plan is responsible for the proper maintenance of and keeping in a state of good and serviceable repair the common property.

The Property comprises x number residential lots, as well as common property. The Plan operates entirely at the direction of the owners of the existing residential units in the Property (the Proprietors). Any action undertaken by the Plan requires the approval of the Proprietors via the approval of resolutions by the Proprietors.

The specified State strata laws relevant to common property in strata schemes:

•                    Subsection XX of the specified Act provides that the owners corporation of a strata scheme holds the common property in the scheme as agent for the owners as tenants in common in shares proportional to the unit entitlement of the owners' lots.

•                    Subsection XX of the specified Act provides that an owners' corporation may dispose of or otherwise deal with any lot vested in the owners' corporation as a result of a subdivision effected under section XX of the specified Act.

Accordingly, as an owners' corporation in specified State, legal title to the common property is vested in the Plan as agent for the proprietors in proportion to their unit entitlements.

For the purpose of this ruling, you requested the Commissioner to assume that none of the Proprietors are registered for GST.

The registration of the strata plan effects the conversion of the common property into lots owned by the Owners Corporation:

•                    According to the relevant State's strata laws, the common property is owned by the owners and, on registration of the new strata plan of subdivision, the subdivided property ceases to be common property and owners will cease holding title in the common property.

•                    The legal and beneficial interests in the new lot will vest in the Owners Corporation.

In around XXXX, the Proprietors of the Property decided to construct a multi-storey building on common property, containing x number of structures (the Structures). Consistent with approved resolutions, the Plan undertook and completed the relevant works on the common property. The Plan engaged and paid the builder for such works.

Prior to registration of the new strata plan, the Structures constituted common property. Once the works were completed, the new strata plan was registered on ddmmyyyy. This plan was a subdivision of that part of the common property in the strata scheme comprising the building, together with those lots that elected to purchase a Structure.

Once constructed, the Plan entered into a contract for sale of the Structure with each of the Proprietors at an agreed price.

•                    A sample contract and associated transfer form are provided:

-        The sample contract is dated ddmmyyyy entered into between the Plan and the proprietors of unit X (being the purchaser) for the sale of lot X (the Structure).

-        The contract includes that the margin scheme will be used in making the taxable supply.

•                    You state that each contract for the sale of the Structures agreed that the margin scheme is to apply to the sale.

•                    Settlement for all but one contract took place in mm yyyy. The remaining contract settled in mm yyyy. Proprietors paid the relevant sale price for the Structures on settlement.

•                    On settlement, the Plan transferred to each Proprietor that part of the new title that issued for their lot comprising the relevant Structure.

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 subsection 75-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(1A)

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(2)

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-5(3)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 75-5(3)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 75-5(3A)

A New Tax System (Goods and Services Tax) Act 1999 section 75-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-10(2)

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-10(3)

A New Tax System (Goods and Services Tax) Act 1999 section 75-11

A New Tax System (Goods and Services Tax) Act 1999 subsection 75-11(7)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 75-11(7)(d)

A New Tax System (Goods and Services Tax) Act 1999 section 195-1