The Trustee for the Whitby Trust and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered a dispute between The Trustee for the Whitby Trust (Whitby) and the Commissioner of Taxation concerning the application of the margin scheme for goods and services tax (GST) purposes. The core of the disagreement revolved around whether an option fee paid by Whitby constituted part of the consideration for the acquisition of real property when calculating GST under the margin scheme.

The Tribunal was required to determine the correct application of the margin scheme provisions within the *A New Tax System (Goods and Services Tax) Act 1999* (GST Act), specifically concerning the treatment of a call option fee. The central legal question was whether this option fee should be included as part of the consideration for the acquisition of real property for the purposes of subsection 75-10(2) of the GST Act, when that property was subsequently acquired following the exercise of the option.

The Tribunal's reasoning was guided by Goods and Services Tax Determination GSTD 2014/2, which states that a call option fee does not form part of the consideration for the acquisition of the underlying real property for margin scheme purposes. The Tribunal accepted that the grant of the option and the subsequent supply of the vacant land were distinct supplies. Consequently, the consideration for the supply of the vacant land was limited to any amounts paid in addition to the option fee. While the option fee itself was not part of the consideration for the property for margin scheme calculations, the Tribunal noted that Whitby might be entitled to input tax credits for the option fee if the acquisition met the requirements for a creditable acquisition, subject to time limits.

The Tribunal set aside the Commissioner's objection decision in part and remitted the matter to the Commissioner for reconsideration. This reconsideration was to be in accordance with the Tribunal's recommendation that the option fee should not be included in the calculation of the margin scheme consideration. The objection decision was otherwise affirmed.