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14 Jan 09 Margin scheme valuation did not comply - Brady King

The Federal Court (Middleton J) has held that a valuation of premises obtained by the taxpayer seeking to take advantage of the margin scheme under the GST Act did not comply with the requirements of s 75-10(3) of that Act. Section 75-10(3) provided (amongst other things) that such valuations must comply with any requirements determined in writing by the Commissioner. For this purpose, the Commissioner had made "A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination (No 2) 2000". The valuer used the hypothetical development method of valuation to estimate a value of the uncompleted premises as at 1 July 2000.

Specifically, the Court held that the valuation did not comply with the Commissioner's Determination because:

  • in calculating the market value of the completed premises, the valuer did not take into account actual sale prices after 1 July 2000;
  • the valuation did not take into account GST on the sale of the completed premises;
  • the valuation did not take into account hypothetical interest costs; and
  • the valuation did not take into account rates, land tax, hypothetical stamp duty and legal costs.
Brady King Pty Ltd v FCT (No 2) [2008] FCA 1918 (Federal Court, Middleton J, 18 December 2008).

For a copy of the decision, go here.

TAXVINE COMMENT: This decision of the Federal Court follows the decision of the Full Federal Court (Brady King Pty Ltd v FCT [2008] FCAFC 118), which held that the taxpayer was entitled to the benefit of the margin scheme, contrary to the finding by Middleton J at first instance: see 2008 TAXVINE No 32 (19) (15 August 2008).

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