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Margin Scheme Explained 

 

If both the purchaser and the buyer agree in writing and the transaction qualifies, then instead of the GST being 1/11th of the selling price. It can just be 1/11th of the difference (the margin) between the price the seller paid for the property and the price it is sold for. Note if the seller purchased the property before 30th June, 2000 then it is not the price the seller paid for the property but its market value at 30th June, 2000 or when the seller first registered for GST. The margin scheme can mean a considerable reduction in the amount of GST payable to the ATO with no downside. For the margin scheme to apply the seller can’t have claimed any GST input credits on the purchase of the property. Both parties must agree in writing that the margin scheme applies, this is usually in the contract. The buyer cannot claim any GST input credits on the purchase of the property. The important thing to remember with the margin scheme is it is very difficult to apply after settlement. The ATO won’t accept wishy washy margin scheme clauses. These are sometimes put in contracts where the solicitor is not even sure if GST applies. The contract needs to clearly state that the buyer agrees. There is an example on this page of a clause that is not good enough. https://www.ato.gov.au/business/gst/in-detail/your-industry/property/gst-and-the-margin-scheme/ 

 

Source: Bantacs

SECFI

Level 11 Brookfield Place

125 St Georges Terrace

Perth WA 6000

 

Phone: 08 9288 4553

Fax: 08 9288 4400

Email: info@secfi.com.au

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