GST and calculation of margin scheme to include money paid to develop the land

Can the entity, a property developer, include money paid to develop the land when calculating the margin under subsection 75-10(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

No, the entity cannot include money paid to develop the land when calculating the margin under subsection 75-10(2) of the GST Act.

The entity is a property developer. The entity acquired the land for $30,000 after 1 July 2000 (contract price). It was acquired through a taxable supply where goods and services tax (GST) was calculated using the margin scheme. The entity then developed it and built a house on it. The entity paid consideration to other suppliers for developments that were performed on the land.

The entity is making a taxable supply under section 9-5 of the GST Act of new residential premises.

The entity meets the requirements to be able to choose to apply the margin scheme under section 75-5 of the GST Act. The entity chooses to apply the margin scheme to the sale of the property.

The entity is registered for GST.

Subsection 75-10(1) of the GST Act provides that if a taxable supply of real property is under the margin scheme, the amount of GST payable on the supply is 1/11th of the margin for the supply.

Under subsection 75-10(2) of the GST Act, the margin for the supply is the amount by which the consideration for the supply exceeds the consideration for the entity's acquisition of the interest in the property.

'Acquisition' is defined in section 195-1 of the GST Act as having the meaning given by section 11-10 of the GST Act.

Section 11-10 of the GST Act provides that an 'acquisition' is to be any form of acquisition whatsoever and provides that it includes: • an acquisition of goods; • an acquisition of services; • a receipt of advice or information; • an acceptance of a grant, assignment or surrender of real property.

Therefore, it is only the consideration provided by the entity to the supplier of the property that is the consideration for the acquisition of the interest in the property. The monies paid for other supplies in relation to the development of the property are consideration for acquisitions other than an acquisition of the interest in the property.

The consideration provided by the entity to the supplier of the land was $30,000. Therefore, the consideration for the entity's acquisition of the interest in the property is $30,000. As such, the entity cannot calculate the margin under subsection 75-10(2) of the GST Act by including the money paid to develop the land. [Note: Under subsection 11-20 of the GST Act, the entity is entitled to claim input tax credits for all creditable acquisitions used to develop the land.]