Edited version of private advice

Authorisation Number: 1052407714405

Date of advice: 12 June 2025

Ruling

Subject: GST - margin scheme

Question 1

Will you, The Trustee for <trust name>, be eligible to apply the margin scheme under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the taxable supplies of the new residential premises situated on land created from the subdivision of the property located at <address>?

Answer 1

Yes, you will be eligible to apply the margin scheme under Division 75 to your taxable supplies of the new residential premises provided that you and the recipient enter into a written agreement that the margin scheme is to apply on or before the date of the supply or within such further period as the Commissioner allows.

This ruling applies for the following period:

<date> to <date>

The scheme commences on:

<date>

Relevant facts and circumstances

You, <company name> as the Trustee for <trust name> (ABN:<number>) conduct a <enterprise type>.

You registered for GST from <date> and currently report your GST obligations on <reporting cycle/basis>.

On <date> you entered into a 'contract of sale' with vendors, <individual name> and <individual name>, for the purchase of a property situated at <address> for $<amount>. The Property was formally known as Lot <number> in Deposited Plan <number> and being the whole of the land comprised in Certificate of Title Folio Identifier <number> (the Property).

Settlement occurred on <date>.

The Property comprised of a site area of <number> and contained within its boundaries a two-storey brick and tile residence with a garage, carport and an inground swimming pool.

As per the contract of sale, the supply of the Property to you was an input taxed supply of residential premises under section 40-65 of the GST Act.

The vendors of the Property were not your associates, nor fellow GST Group members, nor fellow participants in a GST joint venture.

When purchased you intended to demolish the existing residence, subdivide the land and construct two new residential premises on the subdivided land for sale.

You have since completed the development as intended and are currently marketing the two new residential premises for sale. The two new residential premises have been advertised for sale since <date>.

Your supply of the two new residential premises will be taxable supplies of new residential premises.

You wish to calculate the GST payable on your taxable supplies of the two new residential premises under Division 75 of the GST Act.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

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

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

Reasons for decision

In this ruling,

•                     unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

•                     all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.

•                     all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

Division 75 allows an entity to calculate the GST payable on the supply of real property under the margin scheme where the relevant requirements are met.

Subsection 75-5(1) provides that the margin scheme applies in working out the amount of GST on a taxable supply of real property that you make by:

•                     selling a freehold interest in land; or

•                     selling a stratum unit; or

•                     granting or selling a long-term lease;

if you and the recipient of the supply have agreed in writing that the margin scheme is to apply.

Subsection 75-5(1A) provides that the written agreement must be made on or before making the supply or within such further period as the Commissioner allows.

However, subsection 75-5(2) provides that the margin scheme does not apply if the entity acquired the entire freehold interest, stratum unit or long-term lease through a supply that was ineligible for the margin scheme.

Subsection 75-5(3) lists the circumstances which make a supply ineligible for the margin scheme. A supply is ineligible for the margin scheme if:

a)            it is a taxable supply on which the GST was worked out without applying the margin scheme; or

b)            it is a supply of a thing you acquired by inheriting it from a deceased person, and the deceased person had acquired all of it through a supply that was ineligible for the margin scheme; or

c)            it is a supply in relation to which all of the following apply:

                             i.                you were a member of a GST group at the time you acquired the interest, unit or lease in question;

                            ii.                the entity from whom you acquired it was a member of the GST group at that time;

                           iii.                the last supply of the interest, unit or lease by an entity who was not (at the time of that supply) a member of the GST group to an entity who was (at that time) such a member was a supply that was ineligible for the margin scheme; or

d)            it is a supply in relation to which both of the following apply:

                             i.                you acquired the interest, unit or lease from the joint venture operator of a GST joint venture at a time when you were a participant in the joint venture;

                            ii.                the joint venture operator had acquired the interest, unit or lease through a supply that was ineligible for the margin scheme; or

e)            it is a supply in relation to which all of the following apply:

                             i.                you acquired the interest, unit or lease from an entity as, or as part of, a supply of a going concern to you that was GST-free under Subdivision 38-J;

                            ii.                the entity was registered or required to be registered, at the time of the acquisition;

                           iii.                the entity had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme; or

f)             it is a supply in relation to which all of the following apply:

                             i.                you acquired the interest, unit or lease from an entity as, or as part of, a supply to you that was GST-free under Subdivision 38-O;

                            ii.                the entity was registered or required to be registered, at the time of the acquisition;

                           iii.                the entity had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme; or

g)            it is a supply in relation to which all of the following apply:

                             i.                you acquired the interest, unit or lease from an entity who was your associate, and who was registered or required to be registered, at the time of the acquisition;

                            ii.                the acquisition from your associate was without consideration;

                           iii.                the supply by your associate was not a taxable supply;

                           iv.                your associate made the supply in the course or furtherance of an enterprise that your associate carried on;

                            v.                your associate had acquired the entire interest, unit or lease through a taxable supply on which the GST was worked out without applying the margin scheme.

Application to this case

In accordance with your circumstances outlined above, you did not acquire the freehold interest in the land on which the two new residences are situated through a supply that was 'ineligible for the margin scheme'. As per the contract of sale, the supply of the Property to you was an input taxed supply of residential premises under section 40-65 of the GST Act and you did not acquire the Property from:

•                     an associate

•                     a fellow GST group member

•                     a fellow participant in a GST joint venture

•                     as a GST-free supply (either as part of a going concern or farmland).

Consequently, the provisions on ineligibility to apply the margin scheme in subsections 75-5(2) and (3) do not apply to your sale of the new residential premises.

Providing you and the recipient/s of the supplies enter into a written agreement that the margin scheme is to apply on or before the date of the supply, or within such further period as the Commissioner allows, you will be eligible to apply the margin scheme under Division 75, to the sale of the two new residential premises situated on the land created from the subdivision of the Property.