Margin scheme - scenario,

I'm hoping someone could please provide me some advice on how the margin scheme may be applied in the following EXAMPLE (example used for simplicity)

- I'm registered for GST, I bought land for $1m + GST and claimed the GST back (100k)

- a developer comes along and offers $10m (they would be up to pay GST on the sale of this). They can put 100 places on this land

- total development costs for 100 places for the developer is $20m (Inc GST)

-total sales on 100 places for the developer is $30m (they are liable for GST on this)

Can the developer use the margin scheme here to an advantage, or do they just pay the $1m GST to me (they claim back), plus claim the GST back on development costs, then pay the $3m GST on the sales of the land?

If they can use the margin scheme here, do I have to agree, and how would this effect me as the seller?

Appreciate any BROAD advice, noting this is complex and this is an example only, not an actual scenario

Thanks

 

you claimed the gst so the margin scheme cant apply on your sale. Since you are registered and a developer the purchaser could not use the margin scheme either.

 

Thanks - that was quick and easy

 

Q : Do you hold a tax invoice for the $100K GST paid ? Thats quite rare. We call this "fully taxable". Most sellers of land will choose the margin scheme themselves and are commonly developers at the time of sale. This mean the buyer cannot claim any GST. If you buy land from a developer dont assume 1/11th is GST. You must hold a tax invoice that confirms the GST and not have acquired under the margin scheme. If you acquire under the MS you cant also sell using the margin scheme. It is a "once in a chain" issue

The margin scheme may also need to consider who you acquired from. And when and how.. eg If inherited. Bought from a JV associate.....

The vendor chooses if the margin scheme is to be used if they have a choice. If they do it generally will save them tax and enhance profit. A different price may be negotiated for a fully taxable sale. ie higher

Due to the complexity of the margin scheme and GST on property sales it is a area where personal advice is absolutely essential. Well prior to any contract for sale.