GST margin scheme

The GST margin scheme is an alternative method for calculating GST payable on the sale of new residential premises or land, charging GST on the margin between the sale price and the original purchase price rather than on the full sale price, provided specific eligibility conditions are met. Eligibility and the correct application of the margin scheme depend on how the underlying land was acquired and whether GST was charged on that acquisition, which is a matter for a developer's accountant to confirm on each project rather than assume carries over from one development to the next.⚠ For a developer, the margin scheme materially affects a project's GST cash flow and, in turn, how much settlement or GST funding might be needed at completion, since GST liabilities under the scheme can still be substantial even where they are lower than on the full sale price. Lenders funding settlement or GST shortfalls on a development typically ask directly whether the margin scheme applies, since it changes the size of the liability being funded.

Related

Construction finance · Settlement & GST funding · Going concern