Dual Occupancy PPOR - GST & CGT

Hi All,

I have a general understanding of how both GST & CGT applies to developing property, etc., but have a query for those that have a bit more of an in depth understanding.

I understand that developing, say a Dual Occupancy, on vacant land with an intention to sell once complete (while dwellings are "new") would generally require the owner (whether an individual or a company) to register for GST, where you can claim GST credits through the process, and will have one-eleventh of the sale price of each dwelling withheld and paid to the ATO for the privilege.

But if you don't sell the new dwellings, and rent them out instead, after a period of 5 years they are no longer "new" and you may not be required to have one-eleventh of the sale price sent to the ATO - but you would need to reverse any GST credits claimed.

1. How is this GST situation treated if you were to:

- Buy the land (as an individual, NOT a company) and build a dual occupancy
- Register the subdivision (torrens title)
- Sell one dwelling (have one-eleventh of sale price withheld, and I assume also trigger CGT for the portion of the original lot of land attributable to the sold dwelling)
- Move into the remaining dwelling as your PPOR for the minimum timeframe required to have the property actually count as your PPOR (not sure how long this is - 6 months?)

If you sold the remaining dwelling after having it count as your PPOR, would the GST component of the sale price still be paid to the ATO? Or would it then become exempt, you would reverse any GST credits claimed attributable to that portion of the development (one dwelling), and you would receive the full sale price? And the property would also then be CGT exempt as your PPOR?

2. Can you:

- Hold both dwellings for the minimum timeframe to claim the property as your PPOR
- Rent out the second dwelling at the same time as living in the other
- Decide to sell both after minimum timeframe for PPOR, but register the subdivision prior to sale so each dwelling can be sold individually.

I am thinking you don't get a CGT exemption for the sale of both properties. And at least one would still require GST to be withheld?

Is there a better way to do this if your intention was to develop, live in, sell, rinse and repeat to minimise tax liabilities?

 

All i will say is 'it depends'

 

I would not be assuming but seeking personal advice. The comment Hold both dwellings for the minimum timeframe to claim the property as your PPOR is inconsistent with TD 92/135 and the concept of enterprise and developing. You also incorect assume GST issues like "reverse the GST credits"...No you would have no reason to be claiming ITCs and could face penalties. And didnt mention the margin scheme. The lack of claiming ITCs and holding for 5 years could even be a worse tax possition vs selling as new.

And CGT probably wont apply hence why the main residence exemption cant apply. Its not a CGT asset perhaps ?

A sale of new residential premises in the course of a enterprise would require GST to be withheld.