My client’s scenario is:
The client decided to purchase land and build a duplex. At the completion of the duplex, he decided to sell one of them and keep the other as an investment property. I then advised my client that this would more than likely attract GST on the sale of the one he sold.
He then went away and sought some advice from the ATO who said that he should register himself for GST and backdate it to before the signing of the land contract. So, the GST registration was backdated to 14March 2019. They said that he could use the margin scheme.
I have attached for your reference the original land purchase contract together with the sale contract and the settlement statement that shows the tax withheld.
My questions are:
Is he entitled to use the margin scheme in the first place?
He cannot claim GST on Stamp Duty which we agreed, but the ATO literature shows that he cannot claim GST on his Conveyancing/Legal Fees on the purchase?
We have attached a spreadsheet with our calculations which divides everything by 50% to apply to the duplex he sold, do you agree with these calculations.
We have attached the settlement statement that shows the GST withheld of $32,452 of the sale price.
We make general comments and given we do not have source data do not check calculations.
It is correct that GST cannot be claimed on legal fees for the purchase.
The ATO advice to register for GST is correct – there is no doubt that your client was conducting an enterprise.
As the vendor of the land was a company, we suggest that GST was charged on the transaction.
Therefore, unless there was a mutual agreement in writing that the margin scheme applied, then there is no scope to use the margin scheme.