GST on Property Sale

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

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  1. alexm

    alexm Well-Known Member

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    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
     
    alexm, 13th Aug, 2015
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes, hold it for 5 years or more.
     
    Terry_w, 13th Aug, 2015
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    When the purchaser pays it.
     
    Scott No Mates, 13th Aug, 2015
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    When the sale is a going concern.
     
    Scott No Mates, 13th Aug, 2015
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  5. alexm

    alexm Well-Known Member

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    @Terry_w , thanks for the information.

    @Scott No Mates , thanks as well. For a going concern, could you also apply this to residential property?
     
    alexm, 13th Aug, 2015
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  6. Scott No Mates

    Scott No Mates Well-Known Member

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    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
    Scott No Mates, 13th Aug, 2015
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  7. eKwatee

    eKwatee Member

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    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.
     
    eKwatee, 13th Aug, 2015
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  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Vacant land ? That would be interesting.
     
    Paul@PAS, 14th Aug, 2015
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  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    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.
     
    Paul@PAS, 14th Aug, 2015
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    eKwatee likes this.
  10. devank

    devank Well-Known Member

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    Are you saying that between 4 and 5 years is the best time to sell?
     
    devank, 14th Aug, 2015
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  11. shorty

    shorty Well-Known Member

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    No, I think he's saying the opposite.
     
    shorty, 15th Aug, 2015
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  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    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.
     
    Paul@PAS, 17th Aug, 2015
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  13. DaveM

    DaveM Well-Known Member

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    Option D, factor the GST margin scheme into your profit calcs and sell regardless
     
    DaveM, 17th Aug, 2015
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  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    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.
     
    Paul@PAS, 17th Aug, 2015
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  15. DaveM

    DaveM Well-Known Member

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    Yep I paid for my accountant to run through the MS and development scenarios before I started
     
    DaveM, 17th Aug, 2015
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  16. devank

    devank Well-Known Member

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    What is MS?!?
     
    devank, 17th Aug, 2015
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  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Margin scheme. Or multiple schlerosis?
     
    Terry_w, 17th Aug, 2015
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  18. DaveM

    DaveM Well-Known Member

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    Or Microsoft
     
    DaveM, 18th Aug, 2015
    #18
  19. Scott No Mates

    Scott No Mates Well-Known Member

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    Heaven forbid!!!
     
    Scott No Mates, 18th Aug, 2015
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