Join Australia's most dynamic and respected property investment community

GST on Property Sale

Discussion in 'Accounting & Tax' started by alexm, 13th Aug, 2015.

  1. alexm

    alexm Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    304
    Location:
    Sydney
    Hi all,

    I was recently advised that whenever you build on vacant land (house, multi-res, commercial) you're required to pay GST on the sale proceeds but you can claim credits on construction. No issue here.

    However are there situations where you do not have to pay GST on the property sale?

    Cheers
    Al
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,959
    Location:
    Sydney
    Yes, hold it for 5 years or more.
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    When the purchaser pays it.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    When the sale is a going concern.
     
  5. alexm

    alexm Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    304
    Location:
    Sydney
    @Terry_w , thanks for the information.

    @Scott No Mates , thanks as well. For a going concern, could you also apply this to residential property?
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    A going concern must satisfy all of the conditions including business property. So no residential doesn't get a guernsey.
     
    Last edited: 14th Aug, 2015
  7. eKwatee

    eKwatee Member

    Joined:
    19th Jun, 2015
    Posts:
    10
    Location:
    Adelaide
    My understanding was you couldn't claim the credits on residential construction if you rent the property out, only if you sold it brand new.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    Vacant land ? That would be interesting.
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    Sort of. GST is payable on the sale of taxable supplies. Taxable supplies include sales by an enterprise. GST is payable on sale of "new residential property" also...The definition is vague and traps a bit more than some appreciate :
    - Substantially rebuilt / renovated property ?
    - Converted commercial premises like wharves, stables, barns when they are made to apartments etc
    - Yes. New builds

    The term of the "new" applies for the first sale within 5 years. After that its not new. If you sell say after 3 years then its wise to claim the GST on the build as a reducing adjustment to the GST on the sale (maybe even margin scheme) at that time.

    This poses all sorts of issues for records
    - QS reports GST inclusive for costs
    - Problem with claiming GST after such a long time. Records better be good
    - Problem with claiming GST after 4 years !! (s105-55 Schedule 1 of TAA). Before 4 years have expired (based on tax invoices dates) its a sound strategy to sell OR seek the Commissioners approval to claim it after 4 years and before 5 years. If not it may be better to wait.
     
    eKwatee likes this.
  10. devank

    devank Look, lets just get on with this, ok? Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    714
    Location:
    Inner West - Sydney
    Are you saying that between 4 and 5 years is the best time to sell?
     
  11. shorty

    shorty Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    84
    Location:
    straya
    No, I think he's saying the opposite.
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    There can be issues if the GST isn't claimed within the 4 years permitted. This time limit can be extended on request to the Commissioner. After 5 years the GST rules don't allow the GST to be claimed no matter what since the property build is not creditable.
     
  13. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,096
    Location:
    Sydney & Adelaide
    Option D, factor the GST margin scheme into your profit calcs and sell regardless
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    I wish that all developers knew about the MS before they sold. Mistake #1 is they should get tax advice BEFORE they start. Then they keep the right records, get the sale contract drawn correctly and don't make errors in overclaiming GST etc.
     
  15. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,096
    Location:
    Sydney & Adelaide
    Yep I paid for my accountant to run through the MS and development scenarios before I started
     
  16. devank

    devank Look, lets just get on with this, ok? Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    714
    Location:
    Inner West - Sydney
    What is MS?!?
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,959
    Location:
    Sydney
    Margin scheme. Or multiple schlerosis?
     
  18. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,096
    Location:
    Sydney & Adelaide
    Or Microsoft
     
  19. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    Heaven forbid!!!