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GST margin scheme changes no guarantee of simplicity


Tuesday 11 May 2010: Deloitte Indirect Taxes partner, John Koutsogiannis, has acknowledged the Federal Government’s efforts in seeking to clarify the operation of the GST margin scheme, while highlighting that he believes the measures may not go far enough.

The margin scheme can apply to the sale or long term lease of real property, and broadly operates to tax only the ‘value added’ to the property, rather than the property’s sale price. The margin scheme is frequently applied by developers of residential property on sales to private consumers.

Broadly, the proposed changes are not intended to impact the scope or operation of the margin scheme. Instead, they will be focussed on giving prominence to the main principles of the scheme to assist taxpayers to comply with the rules.

No details have yet been released of the nature of the proposed simplification measures. However, the proposal picks up on a recommendation made in the Board of Taxation’s report on the administration of GST and subsequent review undertaken by Treasury.

Mr Koutsogiannis welcomed the Government’s efforts in this area, although observes that simplicity in applying the margin scheme will be difficult to achieve in practice.

“A lack of clarity has to date been part and parcel of the margin scheme, so the property industry will no doubt keenly await the Government’s proposed amendments to this area,” Mr Koutsogiannis said.

“The frequency of litigation and extent of the ‘band aid’ amendments made to the margin scheme over recent years suggest that a tough task lies ahead if an appropriate level of clarity is to be obtained”.

Mr Koutsogiannis also mentioned the Government has proposed an additional technical amendment to the GST law allowing approved valuations to be used in applying the margin scheme to subdivided land.

“This is aimed at overcoming a legislative anomaly, as well as providing taxpayers with a greater degree of certainty in complying with the GST law in this area,” Mr Koutsogiannis.

“Given that fundamental changes are not being proposed to the margin scheme, it is difficult to see that substantial improvements in simplicity for taxpayers will follow”.

“However, residential property developers in particular should be aware of the changes to margin scheme in relation to subdivided land.”

Last Updated: 


John Koutsogiannis
Job Title:
Partner - Tax
Tel: +61 2 9322 7419
Petros Kosmopoulos
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Tel: +61 3 9671 6093, Mobile: +61 4 0700 0926




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