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GST and Residential Rent

Discussion in 'Accounting & Tax' started by Cactus, 14th Apr, 2016.

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  1. Cactus

    Cactus Well-Known Member

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    Hoping @Paul@PFI or someone else who knows can help me with this.

    If a Corporate Trustee/Family Trust structure that owns a residential property and is registered for GST because it carries on other business rents out a property on a residential lease, does the rental figure include GST or is it GST free?

    ATO website says this, but not sure if I have interpreted correctly as no mention about where the entity is registered for GST.

    Rental of residential premises
    If you rent out residential premises for residential accommodation, your rent is input-taxed and you don't include GST in the rental charge. You also can't claim credits for the GST included in any costs relating to the rental, such as agent's commission or repairs and maintenance on the premises.
     
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    There is no GST on resi rents.
     
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  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Residential rent attracts no GST, ownership structure isn't relevant.
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  5. Cactus

    Cactus Well-Known Member

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    Thanks all, that was my understanding, just got concerned when its a company that is registered, good to know no issue there!
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    GST doesn't really apply to an entity. It applies to what are called "taxable supplies" made by any taxpayer / entity. Residential rent is input taxed meaning there is not GST (unless its commercial residential !!). You cant charge it even if you choose to. It also means the GST on residential rental costs paid cannot be claimed.

    This can affect the trust in your case. It may be that some GST cannot be claimed where it relates to the rentals. eg repairs, agent GST, new assets (ie oven) purchased etc. When the property is sold it is not subject to GST if its not "new residential property".
     
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  7. datto

    datto Well-Known Member

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    Johnny Howard was a compassionate man. No GST on certain industries: education, fresh food, medical service, residential rent.

    I wonder if a massage is gst free? Just curious.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Last edited: 14th Apr, 2016
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Fresh food...Thats complex. A fresh or frozen pie = food. A heated pie is a meal and taxed. BBQ chook is food. BBQ chook served on a plate is a meal. Fresh food can be frozen but not all frozen food is food. Frozen prawns = food but frozen prawns for bait are not food. Its such a simple tax.

    And not all GST is 10%.......Dont get me started
     
    Last edited: 14th Apr, 2016
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  10. datto

    datto Well-Known Member

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    I'll just leave it there thanks Paul@PFI
     
  11. Perthguy

    Perthguy Well-Known Member

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    And yet it is still more simple than the old sales tax system. I bought a mouse with a mouse driver bundled. When it came time to claim back the sales tax for my business, I had to look up the sales tax rate for the hardware and the software (different rates), then estimate the value of the mouse and software as a percentage of the overall sales price, then apply the correct rate of sales tax to each percentage. Blah! As a small business person completing a tax return, give me GST any day! :)
     
  12. Cactus

    Cactus Well-Known Member

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    What if an individual not registered for gst does a one off subdivision. When they sell the newly created block of land do they have to remit GST?
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It depends.
     
  14. Cactus

    Cactus Well-Known Member

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    On... Oh the suspense...
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    GST applies if you make a ‘taxable supply’

    A taxable supply is defined at s 9-5

    A NEW TAX SYSTEM (GOODS AND SERVICES TAX) ACT 1999 - SECT 9.5 Taxable supplies

    You make a taxable supply if:

    (a) you make the supply for * consideration; and

    (b) the supply is made in the course or furtherance of an * enterprise that you * carry on; and

    (c) the supply is * connected with the indirect tax zone; and

    (d) you are * registered, or * required to be registered.

    However, the supply is not a * taxable supply to the extent that it is * GST-free or * input taxed.
     
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  16. Cactus

    Cactus Well-Known Member

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    Sorry now I'm more confused. But I think that:

    (A) applies
    (B) doesn't apply if one off?
    (C) confused as to what this means.
    (D) not registered. Don't bill out as a sole trader therefore not required to be. The profit on this new house and land sale would be lower than the threshold, but the total revenue would be higher.

    Does that help?
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Notice the word 'and' at the end of each of the sub sections (a) etc. That means all need to apply to meet the definition of 'taxable supply'.

    So if you are not registered and sell a $45,000 block of land this may not be a taxable supply as it is under $75k and therefore you would not be required to register to make this supply.

    If the land is more than $75k, then you may still not be making a taxable supply if the supply is not made in furtherance of an 'enterprise'.

    Now you may need to consider if you meet the definition of 'enterprise'. selling a capital asset may not mean you are classed as an enterprise.

    However, sub-dividing land may not be on capital account, but it can be.

    see a PBR which Julia, in another thread, posted about, as an example.
    PBR 1012730145598.
    See RBA Content | Australian Taxation Office

    Actually rereading this, it looks like it may have been 2 separate titles from the beginning. the wording is a bit vague - but GST didn't apply.
     
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  18. Cactus

    Cactus Well-Known Member

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    Thanks Terry. Just to be clear what if I build the house on it m, for GST purposes is it still considered a new supply as it has not been lived in.
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you build a house and sell within the first 5 years it will be considered 'new'.
     
  20. Cactus

    Cactus Well-Known Member

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    Oh wow didn't know that. That does impact things massively if your considered to be carrying on an enterprise. It's ok I suppose where you get to claim the GST credits on cost as you only lose 10% of profit.