GST when selling two lots

We purchased a block on land in Brisbane that was already two lots.

There was a house already on one lot that we renovated and rented out.

We also removed some trees on both lots.

We are now looking to sell the block of land.

The best price may be gained by selling the two lots individually.

To do this we would need to add services and register the lots with council.
The other alternative is to do plans for developing units on the site.

Our initial advice is that there would not be any GST either way.

Just wondering if anyone disagrees with that view.

 

are you conducting an enterprise?

 

95% sure you'll pay gst. Best to speak to your accountant about your specific situation though.

If you sell the house with the land there is no gst. Once you get itchy fingers and try to make more money via the subdividing, the GST devil will come for you.

 

That pretty much is the question.

It is a one-off transaction and there will be the question of profit intention.

The difference is that we are not sub-dividing - that happened a long time ago.

 

You plan to add in services etc. I think that will trigger gst but accountants will know best.

 

But you have undertaken a series of steps. Are you registered for GST?

 

Also sounds like your land is not subdivided, there are no services in. It's just one title with two lots.

 

Sounds like it is on revenue account - buy with the intention of split and sell.

Probably GST would apply on the sale. But you need specific tax advice.

 

Not registered for GST and not even sure we will sell it that way.

It was a potential development - we also have a 3rd adjoining property.

We are also going to council with best-use development plans.

Not sure which type of buyer will pay the most.

We can probably get away with just making sure the services don’t cross the blocks.

At the moment the agent is asking about ticking a GST box on the standard contract.

 

If you are selling now need some gst advice asap. Might want to use the margin scheme and that requires it to be in writing and agreed between the parties that it will be used

 

It is subdivided and registered with council and has services on it and two street numbers.

Only needs to be registered with land titles.

The solicitor (on here) thinks it would not incur GST- but definitely listening to the thoughts on this thread.

 

When you said that I thought you haven't put services in yet. I'd definitely talk to ( in person) a good accountant and get proper advice as early as possible.

 

Just a thought, is it worth you building on the lots and selling the end stock?

 

has MT 2006/1 been discussed and written advice provided to say GST doesn't apply (at least you can sue if that advice is found to be incorrect) ?

Had a client with a similar issue and our external tax lawyers advised GST was applicable.

"It was a potential development - we also have a 3rd adjoining property.

We are also going to council with best-use development plans."

that indicates to me and the ATO who read this forum that your intentions were to make a profit from the transaction not merely on capital account.

Land bought with the intention of resale

270. In isolated transactions, where land is sold that was purchased with the intention of resale at a profit (which would be ordinary income) the Commissioner considers these activities to be an enterprise. This would be so whether the land was sold as it was when it was purchased or whether it was subdivided before sale. An enterprise would be carried on in this situation because the activities are business activities or activities in the conduct of a profit making undertaking or scheme and therefore an adventure or concern in the nature of trade

 

Don't forget the income tax side as well.

 

If the intention was to do a development that will be on revenue account not capital.

 

Of course the intention at time of purchase was to move to Brisbane and live on a really large block and develop a really big house - which only now we are reconsidering !

With the zoning the best use would be beyond us.

We are getting advice from a solicitor, town planner and agent - we will now add an accountant as well.

 

And GST applies to the sale of land. The intention at the time of acquisition can be fairly fatal to a enterprise. And this was a feature of the many examples given by the ATO in their recent draft property & construction guidance. Being silent on the issue of GST can be dangerous as there can later be a difficulty with using the margin scheme which may save you a bit of GST. Sale of land using the margin scheme is often highly effective.

One of the catches to selling land this way is the vendors solicitor. They may have concerns that withholding isnt being complied with since the BUYER is liable to withhold. Ignoring/ bypassing the tax issues may likely become a more complex issue later.

 

The block is zone for units - perhaps 10 - so that would be the best use and well above our pay grade.

 

I wonder if the feaso stacks up and if it's within your risk tolerances, to get the DA for the best use and onsell to a developer.