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GST Claim on Land Purchase

Discussion in 'Accounting & Tax' started by iDex, 20th Nov, 2015.

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  1. iDex

    iDex Active Member

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    25th Jun, 2015
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    Perth
    Hi everyone,

    I'm a huge newbie on GST & margin scheme. The scenario is:
    If I bought a piece of land under my own name and choose to develop it and then sell. Could I claim GST from the purchase of the land?

    Am I on the right track? Thanks
     
  2. wogitalia

    wogitalia Well-Known Member

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    The margin scheme is basically a way of simplifying the transactions and pushing the GST payment until the sale of the developed property, you can only use it under pretty specific conditions. If you're using it you only pay GST on the difference between purchase and sale (give or take).

    If you want to claim the GST Input Credits on the purchase you wont be using the margin scheme, of course you will have to remit the GST on the sale of the property down the road.

    They should work out to be the same at the end of the day and mostly be a timing difference.

    As always, you need to talk to your accountant and also the sellers accountant and work together if you're wanting to use the margin scheme particularly. It's a complicated mess most of the time for a system designed to simplify things!
     
  3. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    No accountant here, but you can only claim gst on buying the land IF the seller is selling it with GST. Most land purchases, unless commercial, do not have gst on the purchase.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Most new land development sites are sold using the margin scheme. Most isolated sales of land that comprise a former home etc wont be. ie a deceased estate sale etc.

    You should ask the REA for the contract and it will address if the vendor is selling under the MS. They choose, not you. If so, you cannot use the margin scheme when you sell.

    The contract will also indicate if the seller is making a taxable supply under the margin scheme or not.
     
  5. iDex

    iDex Active Member

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    25th Jun, 2015
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    Perth
    Thanks for the information everyone :)