Land owner's use of a registered associate to maximise input tax credit entitlements and reduce Goods and Services Tax (GST) payable under the margin scheme

An unregistered entity (the land owner) acquires land prior to 1 July 2000. 2. The land owner engages a GST registered associate to construct and market residential premises. 3. The associate engages a builder to construct the residential premises, provides payment for the construction services and claims input tax credits on these acquisitions. 4. The associate on-supplies these services to the land owner but does not require progress payments for the services. 5. The land owner registers for GST and receives an invoice from its associate, just prior to the sale of the premises. 6. The land owner claims a full input tax credit on its acquisition of the services from its associate. 7. The land owner calculates its GST payable on the sale of the premises under the margin scheme using a valuation of the land at the date of its GST registration. 8. The basic features of this arrangement can be summarised diagrammatically as follows: