Issue
Is the entity, a purchaser of real property, required, under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to consent to the vendor's application of the margin scheme to the supply of that property?
Decision
No, the entity is not required, under Division 75 of the GST Act, to consent to the vendor's application of the margin scheme to the supply of that property.
Facts
The entity is a purchaser of a freehold interest in land. The supply of the real property to the entity is a taxable supply under section 9-5 of the GST Act.
Upon settlement, the vendor advised the entity of its intention to apply the margin scheme to the sale of the property. There was no previous agreement between the entity and the vendor to apply the margin scheme to the sale of the real property.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Subsection 75-5(1) of the GST Act provides that where a vendor makes a taxable supply of real property by: • selling a freehold interest in land; or • selling a stratum unit; or • granting or selling a long term lease;
the vendor may choose to apply the margin scheme in working out the amount of GST on the supply.
As such, it is the vendor's choice whether or not to apply the margin scheme to the supply. Furthermore, there is no provision in Division 75 of the GST Act that require the vendor to obtain consent from the purchaser before applying the margin scheme to the supply.
Therefore, the entity is not required to consent to the vendor's application of the margin scheme to the supply of the real property under subsection 75-5(1) or any other provision of the GST Act. [Note: This does not prevent the vendor and the entity from entering into contractual arrangements concerning the application of the margin scheme as part of the negotiations relating to the sale/purchase process undertaken by both parties. However, there is no legislative requirement for this to occur and any such agreement is at the discretion of the vendor.]