Edited version of private advice

Authorisation Number: 1051926237275

Date of advice: 25 November 2021

Ruling

Subject: GST and the margin scheme

Question

Are you (Mrs T, and Mr Q) lawfully entitled to apply the GST margin scheme to calculate the GST on the sale of your property (the Property)?

All further legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless stated otherwise.

Answer

No. You are not entitled to apply the GST margin scheme to calculate GST on the sale of the Property. This is because in the circumstances of this case, the Property is a capital asset of yours and you are not registered or required to be registered for GST. Therefore, the sale of the Property by you is not a taxable supply and not subject to GST.

Relevant facts and circumstances

You are the joint owners of the Property.

The Property consists of farm land and a residential house.

The Property was purchased in 20XX by you as joint owners.

You purchased the Property as a going concern and as advised, you continued to operate the farming business from the Property.

The residential house on the Property has been rented out for most of the time until YYYY 20XX. As advised, currently the residential house is vacant as the Property is under contract to sell.

You are also partners to a registered family partnership (the Partnership). The Partnership has an ABN and is registered for GST.

The Partnership was formed on Y YYYY 20YY, and has since been the entity through which the farming business has been operated.

Section 38-480 concerning supplies of farm land for farming is not applicable to your sale of the Property.

Section 38-325 concerning the supply of a going concern is not applicable to your sale of the Property.

The vendor from whom you bought the Property is not an associate party of Mrs T or Mr Q.

The buyer who will be purchasing the Property from you is not an associate party of Mrs T or Mr Q.

The Property is not an asset of the Partnership. You as partners of the Partnership have not made any in kind capital contributions of the Property to the Partnership at any point in time.

The Property was not acquired by you in your respective capacities as partners of the Partnership. You acquired the Property as joint tenants which is reflected in the title registration. Thus, the Property is a capital asset of yours.

There has been no formal arrangement between you and the Partnership for the Partnership to use the Property in carrying on its farming business. Specifically, the farm land has been used by the Partnership for its farming business, and the use of the farm land has been rent free. The residential house was rented to non-related tenants.

Mrs T and Mr Q are not registered or required to be registered for GST.

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 72-5

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

A New Tax System (Goods and Services Tax) Act 1999 - Section 188-25