Will the sale of your subdivided allotment of property qualify for the margin scheme under section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Yes. The sale of your subdivided allotment of property will qualify for the margin scheme under section 75-5 of the GST Act. This ruling applies for the following period : XX/XX/20XX to XX/XX/20XX The scheme commenced on: XX/XX/20XX
You registered your Australian Business Number effective XX/XX/20XX. You are registered for GST effective XX/XX/20XX. You are not a member of a GST group or joint venture. You carry on an enterprise involving land development. You acquired property from non-associates for $X in monetary consideration. Your purchase of the property did not attract GST. The contract was dated XX/XX/20XX, with settlement on XX/XX/20XX. The property was not acquired as a going concern or as farmland. The land area of the property is X. The property was acquired as freehold interest with vacant possession. The property is recorded by the relevant authority as vacant land. You will obtain approval to subdivide the property and undertake civil works to construct residential properties for sale. You have entered into negotiations with a purchaser to sell a subdivided allotment of the property (Subdivided Allotment). The purchaser is not your associate. The contract of sale for the Subdivided Allotment will include a written agreement between you and the purchaser to apply the margin scheme.
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 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
The margin scheme will apply to a taxable supply of real property if the requirements in section 75-5 of the GST Act are met. Under subsection 75-5(1) of the GST Act, the margin scheme applies where: 75-5 Applying the margin scheme (1) The margin scheme applies 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 of the supply have agreed in writing that the margin scheme is to apply. You will be selling a freehold interest in land when you sell your subdivided allotment of the property (the Subdivided Allotment). The contract of sale will include a written agreement between you and the purchaser to apply the margin scheme. This will satisfy the requirements under subsection 75-5(1) of the GST Act.
The written agreement must be made on or before the time of supply, or within a further period allowed by the Commissioner, in accordance with subsection 75-5(1A) of the GST Act. Your agreement with the purchaser to apply the margin scheme will be included in the contract of sale and will satisfy this timing requirement. You will satisfy the requirement to make a taxable supply if you satisfy section 9-5 of the GST Act: 9-5 Taxable supplies You make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone; and (d) (d) you are registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. You will satisfy these requirements as: • The Subdivided Allotment will be sold for monetary consideration. • The sale will be in the course of your land development enterprise. • The Subdivided Allotment is located in Australia. • You are registered for GST and will remain registered for GST for the sale.
The margin scheme will not apply if the supply is ineligible under subsection 75-5(3) of the GST Act. Your sale will not be ineligible as: • The property was not acquired as a taxable supply. • It was not acquired as a going concern or as farmland. • It was not inherited. • You are not part of a GST group or joint venture. • The property was not acquired from an associate, and the sale of the Subdivided Allotment will not be to an associate. Conclusion The sale of the Subdivided Allotment will be a taxable supply of real property. You and the purchaser will agree in writing to apply the margin scheme. The sale will not be ineligible for the margin scheme. Accordingly, the sale will qualify for the margin scheme under section 75-5 of the GST Act.