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GST on OTP sales

Discussion in 'Legal Issues' started by miked, 20th Aug, 2015.

  1. miked

    miked Well-Known Member

    Joined:
    1st Jul, 2015
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    75
    Location:
    Melbourne
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    That's one a good lawyer will argue with. The market price for a property is GST inclusive since nobody would pay more than market. Raising the rate of GST wont see the market value of property rise.

    If the rate of GST was to increase the legislation will incorporate a rule for pre existing contracts such as OTP contracts. This occurred in the year 2000. GST law will allow existing contract to remain at 10% with a sunset clause when all GST will be the higher rate. (ie maybe 2 years and/or the first review date)

    A clause that allows for adjustment if the rate changes may actually give the opposite effect and act as a review event and then result in the higher rate being payable with the loser being the buyer. Until it occurs we wont know how the legislation and ATO determinations etc will deal with it.

    I would argue the contact should NOT include such a clause as it would be detrimental to both buyer and vendor.