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Using the Margin Scheme When Selling New Residential Property
When building new residential property with the intention of selling for a profit, the biggest consideration, apart from income tax, is GST.
By Bec Mackie and Pat Mannix
Following on from last month, where we discussed the tax consequences of different types of developments, this month we take a more in-depth look at how you can use the ‘Margin Scheme’ to reduce your GST liabilities.
The margin scheme’s been around since the inception of GST but has seen many changes over the years as the ways it can be applied have been redefined. Normally when you sell new (or substantially renovated) residential property you are required to remit one-eleventh of the sale price to the ATO as GST. When you use the margin scheme, the amount of GST you have to remit is reduced to one-eleventh of “the margin”. In this case, the margin is the difference between what you purchased the property for and what you sell it for, it is not your profit margin.
Click on the link below to read more of this great article written for the Australian Property Investor Newsletter by Pat Mannix and Bec Mackie on July 16, 2015.