Development without GST included = hold for 5yrs?

Hi

Am i right in saying if I am doing a multi townhouse development and intend to retain all dwellings.
That in order to not have to go through gst process (or have questions about this raised yrs later) with the construction building.....

That the ato expect owners to hold the properties for 5 years....

If I was to choose not to register the subdivision for the upto 5 year grace period I have to do so, would that have any affect on the ato's interpretation that I have held onto the properties for 5 years from completion of construction / Certificate of Occupancy..... or will ATO interpretation be 5 years from registering of subdivision with seperate titles issued by LTO....

 

GST applies to the sale of new property. New property is property less than 5 years old. The time is determined by right to occupy:


"...time only begins to run once a person has a right to occupy the premises,which is not necessarily the date of completion of building and it cannot be during the period when construction continues to take place.”

Paragraph 37 of FKYL and Commissioner of Taxation (Taxation) [2016] AATA 810

 

Q. Where i have already done a splitter block last year and had a building contract - where i paid the builder with gst on his invoices at each stage, does that the mean I've complied with gst.... i assume?

Q. I'm not exactly sure how this gst thing works....
Is it moreso if i do the build as a private builder where gst kicks in differently....?

 

The issues of GST for each development require advice. Its a STRONG recommendation that you still account for GST and all the costs. The so called 5 year rule is far from simple and its not always 5 years. A recent case (FKYLvCommr) demonstrated that 5 years can be longer than 5 years sometimes. And the question of when the 5 years starts is important. Each unit will likely have a different date. A lot can occur in that period and if a sale is required you could be incapable of redressing the GST correctly if you dont retain the right records from today. Those records are needed for the property cost in any event and for construction industry reportable payments obligations. Its just a matter of doing it correctly from day one.

GST applies to the first sale of new residential property. There are different methods which can reduce how much is paid (sometimes). After property has been continuously rented (and NO other activity in that period) then the GST on sale may not apply - But the GST on the build etc isnt available - And is lost well before the 5 years. Many misinformed people think GST is 10%. It is never 10% of the sale. And its often around 5% for a development. And then further reduced by GST on the build if its eligible to be claimed. Sometimes GST is a net cost of $0 or very little.

IMO people who think they save GST by waiting 5 years are misinformed in many instances.

Timing of subdivisions etc has no impact on any of this.

 

Can you please help me understand when gst implications would be 5% or dor down to a little or $0 net cost?

Thanks

 

In short - land parcel excluded, and GST inputs on build further reduce.

 

...and just to add - being registered for GST and claiming the GST input credits during the build is also highly advantageous from a cash flow perspective, especially where interest isn't capitalised into the loan.

 

WRONG!!

 

You may not always be able to claim the GST. Doing so can result in a audit issue and penalties. Building does NOT mean GST can be claimed. the loan has NOTHING to do with it...I wish I understood what that meant