What is a margin scheme?

A margin scheme is a method used for calculating goods and services tax (GST) on the sale of certain types of business-related properties. Instead of applying GST (10% tax) to the full sale price of the property, the margin scheme allows GST to be calculated based on the difference (or margin) between your initial purchase price of the property and the sale price.

What is an example of a margin scheme?

Suppose you bought a property for $500,000 (including GST) and later decided to sell it. After some time, you found a buyer willing to purchase the property for $700,000.

Instead of applying GST to the full sale price of $700,000, you can use the margin scheme to pay GST only on the difference ($700,000 - $500,000 = $200,000). The GST payable under the margin scheme would be: 10% x $200,000 = $20,000

Can you apply a margin scheme on any property sale?

No, you can't apply a margin scheme to any property sale. The margin scheme is typically used for the sale of property where GST was paid by the seller when they originally purchased the property, such as when buying from a property developer or as part of a business activity. It's essential to consult with a tax professional or legal advisor for specific advice related to your situation.

Preparing to sell or buy

Margin Scheme