The federal government has backed down on proposed changes to the GST margin scheme.
As foreshadowed by
QBR on May 18, Assistance Treasurer Mal Brough this week announced the Commonwealth will make changes to the
Tax Laws Amendment (2005 Measures No. 2) Bill 2005 to ensure GST real property amendments do not have any unintended consequences.
In particular, the government proposes to:
- change the requirement to obtain written agreement for the use of the margin scheme, so that it no longer affects contracts entered into before the date of Royal Assent, but which settle afterwards. The amendment will also no longer affect rights or options granted before Royal Assent.
- remove the new rules for calculating the margin for the supply of real property that was initially acquired as a GST-free going concern, or GST free farm land. The government intends to undertake further consultation with industry on these proposed rules to ensure the margin scheme applies appropriately to supplies of real property.
- make a number of minor changes to address mainly technical issues, including in respect of the grouping, joint venture and deceased estate provisions.
"Since the Bill was introduced into Parliament, the government has been undertaking extensive consultation with the property development industry and the changes announced today address industry concerns," Brough says.
The property sector was especially concerned the legislation would have increased the amount of GST payable on the sale of land.
Instead of paying GST on the difference between the sale price and purchase price, tax would have been applied to the difference between the sale price and the value of land as at July 1, 2000.
In effect, it would have meant that developers could have been liable for GST on increases in value that occurred before they purchased a property.