04 October 2019
Conveyancing - GST and margin scheme eligibility
We act for a purchaser who purchased an off-the-plan property that exchanged in 2017. The vendor wants to amend the contract now to say that the margin scheme applies for GST purposes. How does this affect our client?
Thank you for the question.
It is not possible to conclude how the purchaser is affected without knowing whether they are entitled to an input tax credit which is not available under the margin scheme. Assuming that the sale is of new residential premises, no input tax credit would be available in any event so the purchaser is not affected by the adoption of the margin scheme. It would be prudent to ask the vendor’s solicitor to provide a letter confirming that the vendor is entitled to use the margin scheme and the basis of this entitlement. The factors to be considered are found in the following ATO links: GST and the margin scheme and Eligibility to use the margin scheme.
Bear in mind that whether or not the margin scheme applies the purchaser may be required to comply with the GST withholding provisions unless exchange preceded 1 July 2018 and settlement occurs before 1 July 2020.
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