A margin scheme is a system of accounting that allows a seller to account for goods sold and received in which the sales price is reduced by the amount of margin or profit earned by the seller. In other words, it is an accounting method used by sellers to calculate their profit from selling goods. It involves calculating the difference between what was paid for the goods and what was sold for, and then subtracting any costs associated with selling them.

Definition of Margin Scheme 

A margin scheme can be defined as an accounting system in which a seller reduces its sales price by an amount that corresponds to its margin or profit earned on each sale. This means that instead of charging full market value for each item, the seller deducts some percentage as their own income before passing on any money to their suppliers. The amount deducted is typically based on either a fixed rate or based on cost-plus pricing depending upon how much they sell each item for. 

Eligibility Criteria

At Mosaic Tax Legal, GST margin scheme vacant land allows businesses to pay fewer taxes on their goods and services. It is used when selling second-hand goods, such as those made from recycled materials. To be eligible for the scheme, there are specific types of transactions that must meet certain criteria.

The transaction must be between two registered businesses. This means that only VAT-registered entities can use the scheme; individuals or other non-registered entities cannot take advantage of it. 

Only certain types of transactions are eligible for the Margin Scheme; these include second-hand goods purchased from another business; assets bought through an auction that was previously owned by another business; and sales involving works of art or antiques over 35 years old. 

The seller must have purchased the items within four years prior to their sale in order to use the scheme. In addition, they must provide proof of purchase and verification that they acquired them through legitimate sources like a manufacturer or retailer authorized to sell them in their original packaging with all necessary documentation intact. 

Margin Calculation Process 

Margin calculation is an important part of any business’s financial management. It helps to ensure that the company is operating at a profitable level and that it has the sufficient cash flow to cover its expenses. The process involves understanding how much profit is generated from each sale and then determining what portion of this profit is available for reinvestment or distribution to shareholders. This guide will provide a step-by-step guide to calculating margin under the scheme, providing readers with the necessary information they need to accurately complete their calculations.

Step 1: Calculate Gross Profit Margin 

The first step in calculating the margin under this scheme is calculating the gross profit margin. This figure represents the total amount of money made from sales after costs are deducted from revenue. To calculate this figure, simply subtract all costs associated with producing goods and services from total sales revenue for a given period of time (monthly or quarterly). The resulting number will be your gross profit margin, expressed as a percentage (%) of total sales revenue for that period. 

Step 2: Calculate Net Profit Margin 

Once you have calculated your gross profit margin, you can then move on to calculating net profit margin – which takes into account taxes and other expenses incurred during operations (like wages). 

Tax Treatment 

Tax Treatment with respect to GST implications for businesses is an important topic that needs to be discussed, especially in the current economic climate.

GST (Goods and Services Tax) is a type of value-added tax levied by the government on most goods and services throughout Australia. Goods and services which attract GST are called “taxable supplies”. Businesses that supply taxable goods or services must register for GST, collect it from their customers, and then remit it to the Australian Tax Office (ATO).

Businesses using a scheme may have different tax treatments depending on whether they are registered for GST or not. If a business is not registered for GST, then there will be no GST implications as long as all their sales are below the $75,000 threshold – above this threshold they must register for GST. 

For businesses registered for GST, any supplies made through the scheme will be subject to a 10% of additional tax under the current rate of 15%. This means that if your business sells products through a scheme you will need to charge an extra 10% in addition to any other taxes due e.g., stamp duty or land transfer fees, etc. The additional 10% collected from customers should then be remitted directly to ATO.


In conclusion, the margin scheme calculation is an important tool for businesses to use in order to accurately calculate their profit margins. This calculation helps businesses identify where they need to focus their efforts in order to maximize their profits. For any business looking to maximize its profits, understanding and correctly using this calculation is essential.