Margin scheme of selling a commercial property
Scenario:
I need guidance in purchasing a commercial property with tenant on a going concern basis so it is GST-free. I plan to subdivide the land off the back of this block and build three residential townhouses. On what basis does I calculate the GST purposes margin when selling the properties? (the owner phased the property pre-June 2000 and it has been commercial in the future.)
Explanation:
When applying the margin scheme, s 75-10 of the GST Act states that the supply margin is the amount by which the consideration for the supply exceeds your acquisition of the interest. For subdivided land, only use “the corresponding proportion” for the acquisition (GST Act s 75-15), which means the margin will be the selling price of the properties minus the portion of the purchase price that relates to subdivided part of the land. For example, if the property cost $1million and the portion of the $1 million that relates to subdivided part was $200,000, the margin will be the selling price of the entire properties minus $200,000.