GST when selling under the margin scheme

This might have been covered but I've gone though a heap of threads and can't seem to get the exact info.

I'm selling a newly developed house under the margin scheme. The original house was $565k and was on two lots, I knocked it down and built two new houses. The land values are identical so the proportionate cost was $282.5k per block.

I'm now selling one house for $700k so the margin is $417,500 with a GST portion of $37,954.54.

My conveyancer seems to think that my sale contract should have that GST portion being paid as part of settlement and noted for the buyer to pay (out of the $700k). I am under the impression from my tax advice that I simply pay that with my quarterly statement and the buyer/settlement isn't involved.

I have noted that the sale is subject to the margin scheme and I've asked them to input my ABN under the seller details (agent left it out).

Am I on the right path or do I need to alter the contract to have the buyer noted as paying that GST portion at settlement?

 

What does your accountant advise? What did your solicitor advise when you purchased?

 

new witholding laws since 1 july. for margin scheme the buyer must withhold 7% at settlement, and the seller can receive a credit for GST withheld.

 

Thats not exactly confident. The withholding issue is explained here
Depends when the contract was made. I assume after 1 July.


Does the sale contract specify that the margin scheme is to be used ? If not, the method is unavailable. The issue of withholding should have come up when the contract was drafted ! not when it is being settled. If the contract doesnt have those terms you need immediate legal advice. ie a solicitor.

The actual final calcs for GST will occur on the BAS which is then lodged and may include a credit for a share of the GST on build costs if it hasnt already been claimed. The ATO will give credit for the withheld GST on that BAS and a refund of any excess occurs.

 

Thanks for that. My contract does have the margin scheme noted as a special condition but I couldn't get a straight answer on when the GST is paid.

Your answers help a lot!!

My GST bill won't be $49k but it seems like that is what the buyer will pay to the ATO and I'll get a refund of the overpayment.

I've instructed my solicitor to confirm all of this.

The contract is still conditional so I have plenty of time to make amendments if they are just formalities.

 

A conveyancer and an accountant who both sound like they havent kept up to date.

 

Unfortunately it does seem that way.