GST and Residential Rent

Also Cactus, you mention the trust carries on other business apart from owning and renting the residential property.
It may be worth speaking to your accountant and discussing the option of transferring the business to another trust/structure. Potentially if the business is liquidated/sued all assets of the trust may be at risk - ie the property.

This is why I look for opportunities to seperate assists and business where possible.

However I'm not sure what kind of other business you are running. Was just a small point

 

Only a taxpayer / entity that is eligible to register for an ABN must consider if it should register for an ABN. GST tends to follow and a threshold decision must be made.

The ATO views on whether a taxpayer / entity should have an ABN is found in Ruling MT 2006/1. Its worded very broadly to apply in all circumstances.

So a simple example. Bill and Sue plan to marry and buy a block of land, build a new home. They build it and live in it six months. They break up and decide to sell.

- They don't satisfy the tests for an enterprise and cannot hold an ABN even if they wanted
- They cannot register for GST as they are not entitled to an ABN
- They sell without GST
The property is "new" residential and would otherwise by a taxable supply but in this case it is not.

So lets now assume that Frank buys that property from Bill and Sue and does an extension and plans to build a second cottage, subdivide and plans to sell both. His lender approves his finance on that basis. His plan was to produce a nice profit he estimates at $195,000 and has zero intention of living there etc but may live in it after completion and before it sells but will really continue to live at his parents. Frank has never done this before but is interested in the idea of it being a nice way to make money on top of his job and help him build a deposit for his own home.

Frank should register for an ABN as he operates an enterprise.
- A change in purpose for the use of the land
- Land appears to be bought as a busienss asset
- A coherent plan
- Borrowed funds for the purpose of the plan
- Borrowed funds financed the subdivision
- DA required to achieve plan
- Intent to produce profit as part of cohesive plan

The issue that its his first effort seems dealt with by the ATO ruling TR 92/161 (Profit on isolated transactions). So Frank will need to consider GST when he sells. It wont increase his price. It will erode his planned profit. If he is clever he may use the margin scheme and claim GST on the new build that he undertakes.