GST and timing of the choice to apply the margin scheme

Is the entity, a vendor of real property, required, under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to make the choice to apply the margin scheme to the sale of the property prior to settlement?

No, the entity is not required, under Division 75 of the GST Act, to make the choice to apply the margin scheme to the sale of the property prior to settlement.

The entity is a vendor of real property. In this case, the entity is selling a freehold interest in land by way of a taxable supply under section 9-5 of the GST Act.

The entity entered into the contract of sale for the property, with settlement occurring approximately three months later. At the time of entering into the contract of sale, there was no agreement between the entity and the purchaser that the margin scheme would be applied to the sale; nor had the entity advised the purchaser of its intention to apply the margin scheme to the sale. The purchaser only became aware that the entity was choosing to apply the margin scheme to the sale at the time of settlement.

The entity is registered for goods and services tax (GST).

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.

There are no provisions in Division 75 of the GST Act or any other provisions of the GST legislation that specify when the vendor must make the choice to use the margin scheme. In the absence of any agreement between the parties to the contrary, the choice to use the margin scheme should be made at the time the vendor makes a taxable supply of real property by selling a freehold interest in land, by selling a stratum unit or by granting or selling a long-term lease, that is, at the time of settlement.

The vendor is not required to issue a tax invoice for a taxable supply that is solely a supply of real property under the margin scheme.