GST on sale of new property

Discussion in 'Accounting & Tax' started by zaobaowang, 4th Feb, 2021.

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  1. zaobaowang

    zaobaowang Well-Known Member

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    Alex purchased an existing residential premises in Dec 2015 for 1m, his original intention was to build 3 units as rental properties.

    He did not register for GST and spent 1.25m in construction and planning related fees. The occupancy permit was issued in Feb 2021.

    Due to changes of his personal circumstances, he is considering to sell the 3 units. The market value of the 3 units are 2.5m.

    If he decides to sell them in Feb 2021, ignore the selling fees, the tax implications would be:
    2.5m-2.25m= 250,000 profit
    (2.5m-1m)/11= 136,363 GST payable using margin scheme
    1m/11= 90,909 GST credits - backdating GST registration by four years and reclaim - 1m out of 1.25m construction and planning related fees occurred between Feb 2017 and Feb 2021.

    If he has no other income for this financial year, the final profit would be: 250,000-83167(income tax payable)-136,363+90,909=116379

    Is it correct? Thank you.
     
  2. Terry_w

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

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    first he should get advice on if he is conducting an enterprise.
     
  3. Paul@PAS

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

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    I think the numbers are all wrong. Profit is determined based on ex-GST sale proceeds and costs. Some costs wont have GST and the calcs above ignore that. Records should have been maintained to assist calculating GST, profit and more and then for use with reportable payments reporting each year.