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A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/1

A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/1

Administered by Department of the Treasury

Legislation au F2005L00726 Not in force Legislative Instrument

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A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination

MSV 2005/1

Explanatory Statement

General Outline of Instrument

This Determination specifies requirements for making valuations for the purposes of the margin scheme under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (‘the GST Act’).

The Determination is a Legislative Instrument for the purposes of the Legislative Instruments Act 2003. It is made by, and is legally binding upon, the Commissioner of Taxation.

Date of effect

This Determination commences on 16 March 2005 and applies in respect of valuations made for the purposes of applying the margin scheme in working out the amount of GST on taxable supplies made on or after 17 March 2005. As explained further below, the commencement date of 16 March 2005 ensures that suppliers have the benefit of the valuation method specified in the Determination from the commencement of new provisions proposed by the Tax Laws Amendment (2005 Measures No. 2) Bill 2005 which is anticipated to be introduced on 17 March 2005. It has therefore not been practicable to lodge it for registration under the Legislative Instruments Act 2003 on or before it commenced on 16 March 2005.

What is this instrument about:

Under Division 75 of the GST Act, the margin scheme may be applied to work out the GST on certain supplies of real property. The GST worked out under the margin scheme is 1/11th of the ‘margin’ for the supply.

Subsection 75-10(3) provides that in specified circumstances the margin is the amount by which the consideration for the supply exceeds a valuation of the relevant freehold interest, stratum unit or long-term lease, commonly at 1 July 2000, the date of introduction of the Goods and Services Tax (GST). The valuation must comply with any requirements determined in writing by the Commissioner for making valuations for the purposes of Division 75 of the GST Act.

This Determination specifies requirements for making valuations for that purpose.

What is the effect of this instrument:

A valuation that complies with this Determination may be relied upon by suppliers calculating GST under the margin scheme in accordance with paragraph 75-10(3)(b) of the GST Act.

However, this Determination does not alter or withdraw the valuation methods under the existing Determinations made by the Commissioner for the purposes of Division 75, namely the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 1) 2000 and the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 2) 2000. These existing Determinations are appended to Goods and Services Tax Ruling GSTR 2000/21 as Schedules 1 and 2 respectively. GSTR 2000/21 may be found at www.ato.gov.au.

Rather, it specifies an additional valuation method. The valuation methods specified in those existing Determinations continue to be available in the circumstances set out in those Determinations.

The valuation method specified in this Determination is a valuation of the market value of the freehold interest, stratum unit or long-term lease at the valuation date determined in writing by a professional valuer.

However, if:

the supplier is the Commonwealth, a State or a Territory; and
the supplier has held the interest, unit or lease since before 1 July; and
there were no improvements on the land or premises in question on the day on which the taxable supply takes place,

the valuation must be undertaken as if there are no improvements on the land or premises on that day.

Background:

This Determination is necessary because of the introduction of the Tax Laws Amendment (2005 Measures No. 2) Bill 2005 (‘the Bill’).

Subsection 75-10(3) of the GST Act, as proposed to be amended by Item 14 and clause 75-11 in Item 16 in Schedule 6 to the Bill, provide for an ‘approved valuation’ for margin scheme purposes. Clause 75-35 in Item 20 in Schedule 6 to the Bill, provides that the Commissioner may determine in writing requirements for making valuations and a valuation made in accordance with those requirements is an approved valuation. Under the Bill, those provisions are to be effective from the date of introduction of the Bill.

Item 21 in Schedule 6 to the Bill is a savings provision. Under this provision, a valuation requirements determination made by the Commissioner that is in force immediately before the introduction of the Bill continues in force as if it had been made under the proposed new section 75-35.

However, the existing Determinations only apply where the supplier acquired the relevant freehold interest, stratum unit or long-term lease before 1 July 2000. Proposed new section 75-11 also operates in relation to suppliers who acquired a freehold interest, stratum unit or long-term lease on or after 1 July 2000. Accordingly, there would be no Determination in force for making valuations in relation to real property covered by those new provisions until a new Determination could be made under proposed section 75-35. That cannot occur unless or until the Bill is passed and receives Royal Assent.

Accordingly, this new Determination has been made under the current provisions. Unlike the existing Determinations, its application is not limited to cases where the supplier acquired the relevant freehold interest, stratum unit or long-term lease before 1 July 2000. This Determination will be taken to be in force on the commencement of the amendments as if it had been made under proposed section 75-35. The valuation method specified in the Determination will therefore be available for all valuations for the purposes of Division 75 of the GST Act.

Consultation:

The Commissioner is satisfied that consultation is unnecessary and inappropriate in relation to this Determination.

The Determination is required urgently so that it is in force immediately before the Bill is introduced and thus given effect under the savings provision. Additionally, because the Determination was made before the Bill was introduced, but this Explanatory Statement refers to the Bill, meaningful consultation has not been possible. Further, the Determination does not disadvantage any person as it specifies a new valuation method for margin scheme purposes; as mentioned above, the methods under the existing Determinations remain available for the purposes of paragraph 75-10(3)(b).

Commissioner of Taxation

16 March 2005

Previous draft:

[release date]

Related Rulings/Determinations:

GSTR 2000/21

GSTR 2000/21A

GSTR 2000/21ER

Previous Rulings/Determinations:

[list]

Subject references:

freehold interest
long-term lease
margin
margin scheme
real property
stratum unit
taxable supply
valuation

Legislative references:

ANTS[GST]A Div 75

ANTS[GST]A 75(10)(3)

ANTS[GST]A 75(10)(3)(b)

ANTS[GST]A 75-11

ANTS[GST]A 75-35

Case references:

[list]

Other references:

A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 1) 2000

A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 2) 2000.

ATO references

NO:
ISSN:

Overview

The A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/1, enacted on 16 March 2005, was introduced to address the need for updated valuation requirements under the margin scheme for real property under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999. This determination was necessitated by the introduction of the Tax Laws Amendment (2005 Measures No. 2) Bill 2005, which proposed amendments to the Goods and Services Tax (GST) Act. The Determination was made by the Commissioner of Taxation and is legally binding, specifying a new valuation method for the purposes of the margin scheme to ensure compliance with the new provisions anticipated to be introduced on 17 March 2005. This legislative instrument ensures that suppliers benefit from the new valuation method from the commencement of the new provisions, while the existing valuation methods remain available under the previous Determinations.

Scope and Application

The A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/1 is a legislative instrument made by the Commissioner of Taxation under the authority of the GST Act. This Determination applies to suppliers of real property who are working out the GST on taxable supplies made on or after 17 March 2005, and it specifies the requirements for making valuations under the margin scheme as provided in Division 75 of the GST Act. The valuation method outlined in this Determination is applicable to all suppliers, irrespective of when they acquired the freehold interest, stratum unit, or long-term lease, and is supplementary to the existing valuation methods outlined in the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 1) 2000 and the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 2) 2000. This Determination allows for a valuation of the market value of the property at the valuation date, determined in writing by a professional valuer, and applies to suppliers who are the Commonwealth, a State, or a Territory, provided they have held the interest, unit, or lease since before 1 July 2000 and there were no improvements on the land or premises in question on the day on which the taxable supply takes place.

Key Provisions

The main operative sections of the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2005/1 (the Determination) specify requirements for making valuations for the purposes of the margin scheme under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) (section 1). This Determination, which commenced on 16 March 2005, applies to valuations made for taxable supplies made on or after 17 March 2005. It introduces an additional valuation method for determining the margin, which is 1/11th of the amount by which the consideration for the supply exceeds a valuation of the relevant freehold interest, stratum unit, or long-term lease (section 2). This new valuation method involves a valuation of the market value of the property by a professional valuer on the valuation date. However, if the supplier is the Commonwealth, a state, or a territory, and the property was held before 1 July 2000 without any improvements, the valuation must be as if there were no improvements on the property on the day the taxable supply takes place (section 3). The Determination imposes obligations on suppliers who apply the margin scheme to calculate the GST on certain supplies of real property. Specifically, they must ensure that any valuation used complies with the requirements specified in the Determination (section 4). Suppliers can rely on a valuation that meets the criteria set out in the Determination when calculating the GST under the margin scheme (section 5). Importantly, this Determination does not replace the existing valuation methods under the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 1) 2000 and the A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No. 2) 2000; rather, it provides an additional method. These existing Determinations are appended to Goods and Services Tax Ruling GSTR 2000/21, available at the ATO website (section 6). The Determination does not explicitly outline offences or penalties for non-compliance. However, the failure to comply with the valuation requirements could indirectly lead to incorrect GST calculations, resulting in potential liabilities or audits by the Australian Taxation Office. Given the importance of accurate GST reporting, it is essential for suppliers to adhere to the valuation requirements to avoid any discrepancies in their tax filings (section 7). While specific penalties are not detailed in the Determination itself, non-compliance with the GST Act generally can lead to civil and criminal penalties, including fines and imprisonment, depending on the nature and extent of the non-compliance.

Area of Law: Taxation Law
Instrument: Legislative Instrument
Concepts: Definitions & Interpretation; Commencement Provisions; Regulatory Standards

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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