GST when selling under the margin scheme

Discussion in 'Accounting & Tax' started by Bris Jay, 18th Oct, 2018.

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  1. Bris Jay

    Bris Jay Well-Known Member

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    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?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    What does your accountant advise? What did your solicitor advise when you purchased?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    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.
     
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    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.
     
  5. Bris Jay

    Bris Jay Well-Known Member

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    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.
     
  6. Mike A

    Mike A Accountant Business Member

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

    Bris Jay Well-Known Member

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    Unfortunately it does seem that way.
     

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