Margin Scheme Checklist

Discussion in 'Accounting & Tax' started by Mike A, 9th Jun, 2020.

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  1. Mike A

    Mike A Accountant Business Member

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    lixas4, MTR, Bunbury and 1 other person like this.
  2. Paul@PAS

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

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    Property acquired from a deceased estate / trust or a related party ? Even a partition. #1 on the checklist should be copy of the contract for the acquisition. But maybe thats not really the first question either....

    First question could also concern the basic principle of the ANSTA 1999 s9-5. No enterprise = No GST. Ahhh..... so am I conducting a enterprise ? 99% of taxpayers will argue they arent. merely becuase it means no GST not because its a fact.
     
  3. ParraEels

    ParraEels Well-Known Member

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    Hi,

    I want to buy an old fibro house with DA approval to build a duplex. I want to build a duplex to live in one unit and sell another unit.
    I realised that my intension is profit making and therefore income tax and GST will apply.
    I am not sure how I can buy this property with the Margin Scheme. I read the contract of sale it stated that property is not a GST Taxable Supply and Margin scheme not used in making taxable supply.
    I am not registered for GST and not running any business or ABN Holder.
    What should be the next set-up
    (1) Ask vendor if he want to sell with margin scheme
    (2) Discuss with account and check if I required to register for GST

    Appreciate if someone guide me.

    Thanks,
     
  4. Paul@PAS

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

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    You dont buy using the margin scheme. The vendor will choose and as they arent likely registered its a fail.

    Get paid tax advice
     
  5. Terry_w

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

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    but it is important to understand the vendor's GST status on the sale as this can affect the ability to use the margin scheme later on your sale.
     
  6. ParraEels

    ParraEels Well-Known Member

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    Not sure what precautions I need to take to ensure that I will be able to use the margin scheme. Please see the attached pic of the contract. Do In need to contact the vendor and ask his GST status?

    In contract Vendor disclosed that

    (1) it is not a GST taxable supply
    (2) Margin scheme will not be used in making the taxable supply
    (3) Purchaser not required to make a GSTRW payment
     

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  7. Terry_w

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

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    If you are not sure get some tax advice.
     
  8. Paul@PAS

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

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    Your solicitor as the minimum would be a wise person to address these contract issues. Remember GST liability falls on the BUYER to remit. Its the buyers obligation to ensure their liability is checked and is assured as being $0. And if a GST impact arises it may be too late to avoid and affect the intended use of the margin scheme. I have seen plenty of contracts where the vendor should be registered and then they correct this and elect not to use the margin scheme. That dynamic can vastly change matters. Its a important legal element to ensure that the foundation of the GST clauses is correct. It can be a issue where tax and law cross paths but it is best addressed by the soliictor.

    In very simple cases I would only give tax advice. eg Fred is buying a house and land from Peter and Diedre who are old and retiring and looking to sell their former home to move up the coast. That sale would allow you to use the margin scheme later - Why ? Becasue Fred & Diedre are selling a house that is input taxed as an existing residential home and they are not registered or required to be registsred.
     
  9. ParraEels

    ParraEels Well-Known Member

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    Thank you so much for your inputs. I will chat with my solicitor and will get paid tax advice. Only chance to make it right it now.
     

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