• May 16th, 2015

Australian GST and the Margin Scheme

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GST and the Margin Scheme
Roberta Jones is the CEO of Rondale Pty Ltd. Rondale  is a large property development company with annual turnover of $15 million. The company is registered for GST purposes with quarterly GST tax periods. 
The company is currently involved in a new property development which required them to purchase 4,200 square metres of land (with existing residential premise) in Manly West, Qld from the Urban Property Group Pty Ltd. 
The contract for purchase was dated 20 July 2013 and states the purchase price of $770,000 (inclusive of GST calculated under the margin scheme).
As part of the development, Rondale Pty Ltd undertook the following activities during the 2014 financial year:
• demolished the existing building on the land and constructed 10 townhouses;
• ownhouse “A” is situated on land size of 600 square metres whilst the remaining 9 townhouses are situated on only 400 square metres; 
• incurred construction costs of $4.4 million (inclusive of GST); and
• sold Townhouse “A” on 13 June 2014 for $660,000 (inclusive of GST calculated under the margin scheme);
REQUIRED:
Roberta seeks your advice on the GST implications of the above activities undertaken by Rondale Pty Ltd. In particular you are required to address the following:
1. What input tax credits would Rondale Pty Ltd be entitled to claim in respect of the above transactions.
2. What amount of GST would be payable on the sale of Townhouse “A” on 13 June 2014. 

Write a letter to Rondale containing the above two points and should not exceed 500 words. Please note that this word limit will be strictly enforced and markers will not read (or mark) anything over the 500 word limit.
Please ensure that you makes appropriate references to sections of the GST Act (1999). This will be worth marks. Please do not quote references to paragraphs of the 2015 CCH Australian Master Tax Guide. This is not a source of taxation law and as such, should not be quoted or referenced by students. Students who quote references to paragraphs of the Master Tax Guide will be penalised up to 50% of their awarded mark.

 

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