Sale of Properties and GST - use of margin scheme
28 April 2017
The NSW Aboriginal Land Council (NSWALC) has developed a fact sheet for Local Aboriginal Land Councils (LALCs) about the use of the margin scheme for the sale of properties and GST.
LALCs usually have to pay GST on the sale of their land which is usually 1/11th of the GST inclusive sale price. However there are instances where a LALC's GST liability can be reduced by using the margin scheme.
Where a sale qualifies to use the margin scheme, GST is 1/11th of the difference between the GST inclusive price and the purchase price when the LALC bought the land or the value of the land as at the date the LALC was registered for GST (usually 1 July 2000).
For example: A LALC was granted land pursuant to a land claim and had the land transferred to it on 1 February 2000.
The LALC was registered for GST on 1 July 2000. On 1 April 2017 the LALC sold the land for $220,000 (inclusive of GST).
Usually the LALC would have to pay GST of 1/11th of $220,000 which is $20,000. However the LALC obtained an appropriate property valuation which valued the land at $150,000 as at 1 July 2000.
Using the margin scheme to calculate the GST, the LALC would only have to pay GST on 1/11th of $70,000 (being the difference between the sale price of $220,000 and the valuation amount of $150,000). By using the margin scheme, the GST payable is $6,363.64 instead of $20,000.
LALCs should obtain independent legal and financial (including tax advice) when considering dealing with its land as each transaction is different and a LALC may not be able to use the margin scheme or using it may not be of benefit.
For further information, please refer to NSWALC's fact sheet: : Sale of Properties and GST - use of margin scheme