| Disclaimer 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 private advice
Authorisation Number: 1052356708719
Date of advice: 12 February 2025
Ruling
Subject: GST - margin scheme
Question 1
Is the company eligible to apply the margin scheme in working out the amount of GST on the sale of the properties?
Answer 1
The company will be eligible to apply the margin scheme in relation to working out the amount of GST payable on the sale of the properties, provided the company obtains written agreement from each of the purchasers of the properties, that the margin scheme is to apply.
This ruling applies for the following period:
Financial year ending 30 June 20XX
The scheme commences on:
The date this private ruling is issued
Relevant facts and circumstances
The company holds an Australian Business Number (ABN) and are registered for GST.
The company purchased a residential property.
The company demolished the residence and constructed three houses.
The properties were sold however, the contracts of sale did not contain written agreement between the company and the purchasers that the margin scheme is to apply to the sales.
The company have applied for and been granted an extension of time to obtain written agreement from the purchasers of the properties by the Commissioner of Taxation (Commissioner).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 75-5
A New Tax System (Goods and service Tax) Act 1999 subsection 75-5
Reasons for decision
Under section 75-5, you can apply the margin scheme in working out the amount of GST on a taxable supply of real property that you make by:
(a) selling a freehold interest in land; or
(b) selling a stratum unit; or
(c) granting or selling a long-term lease;
if you and the recipient have agreed in writing that the margin scheme is to apply.
Subsection 75-5(1A) states:
The agreement must be made:
(a) on or before the making of the supply; or
(b) within such further period as the Commissioner allows.
In this case, the company acquired a residential property that was not subject to GST. Therefore, the supply of the property is not excluded from being eligible for the margin scheme under subsection 75-5(3).
However, the contracts of sale relating to the sale of the properties did not contain an agreement in writing between the relevant parties that the margin scheme will apply to the sales.
The Commissioner has granted the company an extension of time to obtain the written agreements from the purchasers that the margin scheme will apply.
Conclusion
Provided the company obtains the written agreement from the purchasers of the properties that the margin scheme is to apply to the sale within the time frame given by the Commissioner, then the company will be eligible to apply the margin scheme in working out the GST payable on the taxable supplies of residential premises.
If written agreement is not obtained, then the company will be required to report and remit the amount of 10% GST on the total sale price of the properties.