Q: A client is buying a commercial property with a tenant, which means the purchase is GST-free because it's considered a going concern. However, the client plans to divide the land and build three residential townhouses. How does the client calculate the GST margin when selling these properties? (Note: The owner originally phased the property before June 2000, and it's been used for commercial purposes since.)
A: When using the margin scheme for GST purposes, the calculation involves subtracting the portion of the purchase price related to the subdivided land from the selling price of the properties. This means that only the portion of the purchase price corresponding to the subdivided part of the land is considered in the calculation. For example, if the property was bought for $1 million and $200,000 of that was related to the subdivided part, the margin would be the selling price minus $200,000.
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