Changes to the margin scheme

16 December 2010

The Federal Government has released a discussion paper: Implementation of the recommendations of Treasury’s review of the GST margin scheme. The closing date for submissions is 21 January 2011.

The GST margin scheme allows taxpayers an alternative means of calculating GST on property. When calculating GST in the normal way, GST is one eleventh of the GST inclusive selling price. Under the margin scheme, the GST is calculated as one eleventh of the difference between the selling price and the acquisition cost of the property (the margin), however, the supplier has no entitlement to input tax credits for its acquisition of the property.

The changes are supposed to “clarify and simplify” the GST margin scheme provisions and reduce compliance costs.

The paper provides for “an approved valuation of land” to be used to calculate the margin on subdivided or strata-titled land, as well as changes to the way the scheme is described to improve readability.

Treasury says these changes are not expected to have any impact on revenue but provide an opportunity to address the additional complexity that has arisen from legislative changes since July 2000.

New provisions expressly stating that an approved valuation can be used is apparently necessary to overcome existing legislative provisions that only allow apportionment to sub-divided or strata-titled land based on what was paid for the land (rather than a valuation of the land). The change would apparently confirm an Australian Tax Office ruling.

The changes are intended to apply from 1 July 2012.

The discussion paper, with more detail, is available here.

Please contact us if there are any matters you think we should raise in a submission.