# Where Is The Margin Scheme Benefit?



## abrogard (8 mo ago)

The GST Margin Scheme, I'm told, offers a reduction. Okay. But how/where is it?

I can understand this well enough, I think ( an example from a book) :

Vendor: buys a block gst free. For $500,000. Spends $365,000 on building on it. Sells for $900,000
The margin is $400,000. The building costs are irrelevant.
The GST is 1/11 x $400,000 = $36,363

So that's the 'reduced' GST. 

What's the 'non reduced' gst? All the stuff I read explaining the margin scheme to me fails to mention the cost WITHOUT the margin scheme.

So I figured it must be this:

Sells for $900,000 : GST $90,000
MINUS gst credits for the building which = $33,181
$90,000 - $33,181 = $57,189

The 'not reduced' GST is $57,189.

So the 'saving' is $57,189 - $36,363 = $20,826

Right? I don't believe it. I can't see the ATO 'giving away' that much money.

Can anyone explain it to me?


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## JandE (Jul 17, 2015)

abrogard said:


> The GST Margin Scheme, I'm told, offers a reduction. Okay. But how/where is it?
> 
> I can understand this well enough, I think ( an example from a book) :
> 
> ...


You are getting into complex tax issues with this, and it may not even be relevant.

*Eligibility to use the margin scheme*

If you sell property as part of your business and you're registered for GST, you may use the margin scheme to work out how much GST you must pay.
If you use the margin scheme the parties must have a written agreement to use the margin scheme *before* settlement.

You *can’t* use the margin scheme:

if you purchased the property as fully taxable and the margin scheme wasn't used
if you weren’t registered or required to be registered for GST at the time of your sale


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