Case Study OneABC Pty Ltd as trustee for the Property Syndicate Unit Trust ("ABC") purchased an oceanfront block of land for $6.3m from a property developer on 30 September 2020. GST on the sale was calculated using the margin scheme.
 

ABC is registered for GST in its role of developing the land for sale.
 

On 1 January 2021, ABC then sold a 5% undivided interest in the land to each of the five individuals for $310,000 per interest. This means that ABC has a 75% interest in the whole of the block and each individual a 5% interest in the whole block as tenants in common. The five individuals are related parties to the five unitholders in the Property Syndicate Unit Trust.
 

Significant expenses were incurred in getting the land ready for development approval. The costs are shared amongst all in proportion to their stake in the land. Statutory approval was subsequently obtained allowing the land to be subdivided into 20 (twenty) lots on 25 May 2022.
 

The lots are now being sold; one lot each to the five owners, 15 lots to ABC, in proportion to their undivided interests.
 

The lots, including those to be transferred to the individuals, will each have a market value of $1m. Valuations have been obtained.
 

For each of the five individuals to obtain their share of the land, it is necessary for each participant to mutually convey their interest in the land to the others. No money changes hands. Each party effectively swaps its undivided interest in the entire block for their total interest in the smaller block (or, in the case of ABC, 15 blocks).
 

Each individual will transfer its 5% undivided interest in the 75% of the land (the 15 lots) to go to ABC in return for ABC transferring its 75% undivided interest in the 5% of the land (the individual lot) to each owner.
 

Settlement of the transfer of interests takes place 15 June 2022.
 

The five individuals are not registered for GST.

 

Is the supply of the interest in the land to the individuals a taxable supply by ABC as trustee for the Beach Trust? 5 marks
 

In calculating GST liability, can ABC use the margin scheme? 10 marks
 

What is the nature of the entity or entities that are getting the land ready for development approval? Are they carrying on an enterprise? 15 marks
 

Are input tax credits available on the development costs? 5 marks
 

Is the mutual conveyance of the interests in the land a supply for consideration by the individuals and ABC? 12 marks
 

If so, does it give rise to any GST liability? 8 marks
 

If ABC has a GST liability of the transfer of its interest in the five lots, under what circumstances can that liability be calculated using the margin scheme? What is the cost base for the margin scheme? What is ABC's GST liability on the transfer? 15 marks
 

When does the GST liability arise? 5 marks
 

Will ABC have a GST liability when it sells the remaining 15 lots? 5 marks
 

If ABC has a GST liability of the sale of the 15 lots, under what circumstances can that liability be calculated using the margin scheme? 5 marks
 

What will be the cost base for the margin scheme for the 15 lots? Assume that all lots are of equal market value. 15 marks.