API Magazine - Article on Splitters - GST on land sale.

Hi gang,

Just reading an article in API about a fellow that bought a splitter, demoed the house, then sold two blocks of land for a profit. From what he has mentioned, he definitely undertook this with the intention of making a profit. From what I understand he should most definitely be paying GST on the sale of the blocks, however in the article, it states he paid Nil GST.

Is he asking for trouble firstly by not paying GST, then admitting it in a magazine that the ATO would most definitely review?

I guess a better way to put it, is there any scenario (where it would clearly be categorised as operating a business, with the intention of making a profit, with turnover of well over 75k), where sale of land would avoid GST?

In my understanding this is not possible, but perhaps there is a way?

Cheers,

 

Maybe he was using margin scheme and made 0 profit?

 

See if we can wake up some Sydney accountant posters and get their opinion.

 

Hahaha.

DT. Fortunately for him he made around a 9% return in 3 or so months which is actually pretty decent.

I'd be interested if he somehow found a loophole or strategy that allowed him to weasel his way out of it legally, or if someone should be telling him to wait for a call from the ATO hahah.

 

I cant speak for the person but it seems either it was low value land or that the GST payable on the land sale was offset by GST on the costs to subdivide. Its quite likely that occurred. If so its likely he made no profit. Or made a mistake in how he determined GST.

The person in the article doesn't have to operate a business. Just have an intention to profit and the nature of how he undertook the land activities appears to be a enterprise.

Its always amazing how people admit to somethings in a published article.

 

I don't read these magazines, but Maybe he was not registered for GST and it was sold sold on capital account.

 

Based on activity description that would be a concern. Buy, demo, subdiv, sell in three months. Then tell API how much profit you made ?

 

Then be awarded investor of the year!

 

Julia, in another thread, posted about PBR 1012730145598.

See RBA Content | Australian Taxation Office

This person sold land with no GST because what they were doing didn't amount to an 'enterprise' as the sale was an isolated transaction and merely the realisation of a capital asset.

 

They don’t qualify - this is development or at best speculation not investment per se.

Still qualifies for bragging rights.

 

LOL...
Its not that hard then, just lose money and then those on the judging panel have something in common, they too are losing money

 

I did this 12 months ago and I paid GST margin scheme, I don't understand how you could not pay it unless not registered and then that will open another can of worms, I guess.

 

Then what do you class the 2012 winner?

 

..... and buying in mining towns is not speculating???, let me buy a bucket load, one of the judges for another investor magazine......Helen K-C guru extraordinaire has something like 17-18 in this area (Moranbah)....

 

The only API magazine that I read is the Australian Property Institute.

 

I should clarify, he states he made a 65k profit by his accounts. Just begging for trouble hahahah.

 

Only to lose your crown later as seems to be a poison chalice for many......

 

I think generally speaking developers seem to target 20%+ gross on projects .

If he is making $65K gross then it wont too hard to work out, deduct selling costs, GST (margin scheme), tax @ 30%... it also comes down to timeframe, ROI.

 

Hi MTR,

I calculated about 9% ROI pre tax (including affects of MS) using my model using his costs (assuming he should have paid GST) etc. I think this is pretty fair considering very low risk, 3 months return etc.

With splitters, 20% is often not as easy to achieve, however less risk, smaller timeframe etc.

Anyways, my point was he DEFINITELY made cash, and is stating openly on a magazine (that I know for a fact the ATO reads) that he didn't pay GST.

Good luck to him!

 

perhaps he wasn't required to pay GST?