Margin scheme

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GST you pay on a property sale is one-eleventh of the sale price.
But under the margin scheme, the amount of GST you must pay is one-eleventh of the margin ie. the difference between the sale price and the amount you paid for the property.

So who can use the margin scheme?

If you’re selling a property as part of a business and you are registered for GST, you may be able to use the scheme.

You can use the margin scheme if either:

  • you purchased the property before 1 July 2000 (the start of GST), or
  • you purchased the property after 1 July 2000 from someone who:
    • was not registered or required to be registered for GST
    • sold you existing residential premises
    • sold the property to you as part of a GST-free going concern or GST -free farmland
    • sold you the property using the margin scheme.

Many people can often be confused by the term margin, thinking itrefers to:

  • the profit margin
  • the selling price minus a valuation of the property for a property purchased after 1 July 2000
  • a capital gain

Developers purchasing residential land for development should always aim to purchase under the margin schem because without it they will not be able to apply the scheme when it comes time to sell the developed properties.

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