On Friday 12 April 2013 the ATO published ATO ID 2013/18 ‘GST and the application of the margin scheme to taxable supplies to associates for no consideration’ where the ATO confirmed that an entity could use the margin scheme to work out the GST payable on a taxable supply of real property that was held prior to 8 December 2008 and made after 24 March 2010 to an associate for no consideration where the associate will not use the real property for a fully creditable purpose.
Because the entity made a supply of “new residential premises” to an associate for no consideration, and the associate will not use the real property for a fully creditable purpose (being to rent out the premises), the supply is a taxable supply pursuant to the “associate” provisions in s 72-5 of the GST. Further, the supply of the freehold interest in real property is taken to be sale in accordance with s 72-20 (which apply to supplied made after 24 March 2010). As the parties have agreed in writing that the margin scheme is to apply, the relevant requirements of s 75-5(1) are satisfied.
The ATO ID notes that if the entity had acquired the entity on or after 8 December 2008, a subsequent supply for no consideration made to an associate would be treated as a sale according to s 75-5(1B) of the GST Act.