ARTICLE · 14 MARCH 2012

Tax Alert: ATO guidance released on margin scheme valuations

Grant Thornton Australia

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The margin scheme is one method that may be used to calculate the GST liability on the sale of real property.

AustraliaTax

By Krish Patel

The margin scheme is one method that can be used (if certain requirements are satisfied) to calculate the GST liability on the sale of real property. It is typically used by residential property developers for the sale of new residential premises.

There are two methods that can be used to calculate the GST liability under the margin scheme. These are:

The valuation method - which can only be used in certain circumstances, including when the property was acquired before 1 July 2000; and
The consideration method - for property purchased after 1 July 2000.

Since the introduction of the GST and the margin scheme, the main area of contention and audit activity has involved valuation issues. Thankfully, 12 years on, the Australian Taxation Office (ATO) has released some guidance.

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