Hi all, Just a question regarding how you calculate GST on the sale of a house which is 2 years old? Is it based off build cost ? Is it GST paid on materials? Off purchase price? The house was purchased and built under a company name. Any help much appreciated! Thanks
Hey Mike, I’ve just been reading about the margin scheme. Sounds like the way to go. Is it basically worked out the sale price minus expenses (ie cost of build) and then GST paid on the difference. So sale price = $900k Cost of build = $400k Profit = $500k GST = 1/11th of $500k Correct? Thanks for your help
No. The first thing is to check you are eligible to use the margin scheme. The margin is the sale price less the land cost and other costs are ignored. You may also need to consider what GST was incurred on construction activities and eligible for a tax credit to offset the GST payable. This is based on tax invoices held and will include final selling costs like the legals and agent fees. And the sale will result in GST withholding and that is credited to the BAS as well. Calculation of final profit is based on GST exclusive values If the company produced a profit, tax advice on how this is taxed would be wise. You cant just take it without a tax consequence. You could end up with a company paying tax and yourself as well and an inability to use franking credits for example.
Is the company registered, or required to be registered for GST? What happened in the intervening two years? Rented out? Actively marketed for sales? Do these things matter?
Thanks Paul! Gday Hamish. - company is registered for GST - advertised for sale brand new - didn’t sell - then rented for 15 months - then sold Thoughts? Cheers
Paul, how will the GST claim be reduced? OP - did you claim back the GST on construction costs in the first place? And if so - was this repaid when you decided to rent rather then sell?
There is a formula contained in the relevant tax ruling GSTR 2009/4 (and others). This adjusts the value of the input tax credits for the change of creditable use of the property . The value of rent received as a % of total income (sale + rent) will reduce the tax credits (See Para 117 etc)...The longer its rented the larger the reduction. Note also the 5 year rule and its modification by the 4 year tax invoice rule. Input tax credits are limited to 4 years after the tax period in which the credit was attributed (often in the quarter when paid)..
