Where the supplier and recipient of the supply agree in writing that the margin scheme is to apply, the margin scheme applies in working out the amount of GST on a taxable supply of real property. However, the margin scheme does not apply if the supplier acquired the real property through a supply that was ineligible for the margin scheme. The amount of GST on a taxable supply of real property under the margin scheme is oneeleventh of the margin for the supply.

Depending upon the specific facts and circumstances, the margin for a taxable supply of real property is worked out by reference to:

  • the consideration provided by the supplier of the real property, or another specified entity, for their acquisition of the interest, unit or lease in the real property
  • an approved valuation of the interest, unit or lease in the real property as at a specified date, or
  • the GST inclusive market value of the interest, unit or lease in the real property as at a specified time.

However under the current law, where the relevant interest, unit or lease in real property that is sold has been subdivided from land or premises acquired by the taxpayer, the current provisions for determining the margin only refer to the first method and not the second and third methods although as a matter of administrative practice working out the proportion using the second or third methods has been allowed.

The proposed amendments will ensure that a taxpayer can use, where relevant, a corresponding proportion of consideration provided, an approved valuation, or the GST inclusive market value of the land or premises acquired in determining the margin for the taxable supply of subdivided real property.