The short answer is: Yes, you can apply the GST margin scheme after settlement – but only under specific circumstances.
When dealing with property transactions, the Goods and Services Tax (GST) margin scheme can significantly reduce your GST liabilities. Typically, to apply the margin scheme, both parties must agree in writing before settlement. But what if this step is missed? Can the margin scheme still be applied after settlement?
The short answer is: yes, it’s possible—but only under specific circumstances.
The Australian Taxation Office (ATO), under PS LA 2005/15, recognises that genuine oversights occur. Therefore, the Commissioner of Taxation has discretion to allow parties additional time to formalise their agreement to apply the GST margin scheme, even after the property settlement has occurred.
When Can the Commissioner’s Discretion Apply?
The ATO may extend the time for making a written agreement if:
- The failure to agree in writing before settlement was due to an honest oversight or genuine misunderstanding.
- Both parties clearly intended for the margin scheme to apply from the outset.
- There is supporting evidence, such as correspondence or preliminary agreements, indicating the initial intention to use the margin scheme.
How to Request an Extension to Apply the GST Margin Scheme
To request the Commissioner’s discretion:
- Prepare a written explanation detailing the reasons for the delay.
- Provide evidence demonstrating both parties’ original intent.
- Submit the request through the appropriate channels of the ATO.
All requests must be reviewed and approved by an ATO officer at Executive Level 1 or higher, and each case is considered individually.
Avoiding Common Pitfalls
The best approach is always prevention. To avoid complications:
- Clearly document your intentions and agreements well before settlement.
- Consult a tax professional early to ensure compliance.
Need Help?
If you’ve already settled your property transaction and missed applying the margin scheme, all is not lost. Our experienced team of tax advisors can help you navigate the ATO’s requirements and maximise your GST outcomes.
Contact us today for expert guidance.
Ben Gu is a Chartered accountant, registered tax agent, registered ASIC agent, SPAA specialist advisor and CA SMSF specialist with experience across a wide range of tax and business.
