Gst & Margin scheme

Discussion in 'Accounting & Tax' started by Macca74, 12th Jan, 2018 at 10:27 PM.

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  1. Macca74

    Macca74 New Member

    Joined:
    11th Feb, 2016
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    Location:
    Adelaide
    Hello all, i am just looking for some advice.
    I have just signed a contract to buy an already subdivided block of land from a vendor that is not charging gst on the purchase price with no mention of margin scheme.
    My plan is to build a house and rent for at least 5 years and then sell after the best depreciation is used and to progress the strategy.
    I am under the impression that if i was to build the house and sell immediately i can use the margin scheme to reduce the gst as the original owners are not charging gst on the sale contract.
    My question is if i hit a servicability wall and have to sell earlier than 5 years would i be better off claiming gst credits paid to the builder while under construction?
    If i sell within 5 years and have not claimed these gst credits will they be lost?
    Is it better to claim them as i am building and then do an adjustment years down the track once i sell?
    Thanks,
    Daniel
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Don't worry they are not lost. You can claim the credits and debits at the same time
     
  3. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I am under the impression that if i was to build the house and sell immediately i can use the margin scheme to reduce the gst as the original owners are not charging gst on the sale contract.

    This may or may not be the case.

    What does your tax adviser say?
     
  4. Macca74

    Macca74 New Member

    Joined:
    11th Feb, 2016
    Posts:
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    Location:
    Adelaide
    Hi Terry, sorry for late reply it has been hectic this weekend.
    I have not spoken to a specific tax adviser yet.
    I have just been doing a lot of reading on the ato website and past topics on somersoft and pc - there seems to be some conflicting info even on the ato website and it seems a lot more complicated than it needs to be!
    Did i mention that i am a sole trader registered for gst already and i am also the director of a building company that i will be using to build the house myself.
    My plan all along has been to hold for at least 5 years and so i was not overly concerned about the margin scheme but it is good to try and get a clearer understanding of it just in case.
    Cheers
     
  5. craigc

    craigc Well-Known Member

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    Location:
    Melbourne
    I believe Terry is correct, however it will change from 1st July this year when GST will be withheld from sale proceeds by conveyancer to remit to the ATO. Credits then claimed back afterwards, details tbc.
    Please confirm details with your tax advisor.
     
  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Only a enterprise registered for GST can choose to use the margin scheme. And the choice of use of the margin scheme MUST be contained in the sale contract. Otherwise the margin scheme is lost ! Hence tax advice specific to the taxpayer needs to be considered. The margin scheme can be used unless the margin scheme is not permitted to be used eg where the land was acquired under the margin scheme. A lawyer needs to review the contract to give that legal advice.

    GST credits dont remain available for 5 years !!