The margin scheme is a way of working out the GST you must pay when you sell property as part of your business. You can only apply the margin scheme if the sale of the property is taxable. If you purchase property where the margin scheme was applied to the sale, you cannot claim a GST credit for the GST included in the purchase price of the property. The margin scheme cannot be used on your property sales if you originally purchased the property as fully taxable and the margin scheme was not used. In this situation you may be able to claim the GST included in the purchase price if the property is going to be used in your business.
The amount of GST you must normally pay on a property sale is equal to one-eleventh of the total sale price. When you use the margin scheme, the amount of GST you must pay on a property sale is equal to one-eleventh of the margin. Your margin is generally the difference between the sale price and either the amount you paid for the property or the value of the property provided in an approved valuation of the property as at 1 July 2000 (if certain conditions are satisfied).