leasing out before selling GST question

i have just heard that if you lease out a newly built home before selling it, you still need to pay GST when selling (rent out less than 5 years) BUT cannot claim GST already paid during construction?

is this correct?

 

Incorrect. Excepting an exhibition home perhaps (rare and doubt so)
Many errors in the post. Personal tax advice would address these issues

Do you have an enterprise and so sales are subject to GST ?
Registered for GST ? or required to be.....
Did you use the margin scheme in the contract ?
What % of the build is new residential premises and being sold ?
Perhaps that % of GST on the build may be creditable to offset the GST on sale. When to claim ?

GST on build may be partially creditable but not 100% if leased and sold within 5 years

 

Hi paul,

the entity holding the properties is GST registered. only reason a couple of the units might be rented out is because of seasonality. will list again in summer.

re margin scheme : am using margin scheme on units that have sold so far, have written in contract that margin scheme is applicable etc...

re: what % of build, there are 5 news homes, selling 3 now, planning to rent 2 temporarily.

could it be that what was meant is that if i am renting out 2 units, then i cannot claim GST refund now, However, once i sell, i can deduct GST already paid?


Do you mind elaborating or giving sample of this statement , dont quite get it.

"GST on build may be partially creditable but not 100% if leased and sold within 5 years"

 

just to add, it was my bookkeeper who told me those.

am waiting for accountant to call me back, but in the meantime, my stress level went BOOM, hence seeking some interim advice.

 

Well I know this going to be confusing but its just a statement of fact.

GST on build WILL be partially creditable but not 100% if leased and sold within 5 years for the 2 units being retained. You cannot claim the GST on the build for those 2 units. You might be able to claim some of it later if time doesnt expire. If you already claimed it then it must be repaid and the former BAS' amended to correct the defective claim. ATO consider avoidance and evasion if you claimed it.

 

Good they warned you. Why didnt your tax adviser forewarn you ? Didnt you ask ?

Its explained in our developer toolkit

 

i didnt ask the right questions perhaps. but it was a little bit of change in situation as well why i deviated from original plan.

last question if you dont mind, when we say partially creditable but not 100%- is there a range available? like 50%?

 

Formula. Time based.
After 4 years tax credits expire too.

GSTR 2009/4 explains this

 

Thanks a lot. just read thru your dev tool kit. and the example given is exactly where i am at.

 

Generally, GST is applicable if you sell within 5 years as the property is 'new' - but other aspects to conisder too - if registered or required to be registered, conducting an enterprise etc.

If you are holding a property then you may not be able to claim GST input tax credits

 

Division 129 gst adjustment

 

Thanka for the responses. Read the gstr 2009/4 , wish they can dumb it down a bit more head hurts.

Luckily i havent done anything such as claim gst credits back. Started to read the part abt div 129.

 

All these developer tax issue are complex. Fraught with errors too and ATO are happy to impose penalties and interest.

Recent tax case concerning the 5 year rule is a good example. Property sold after 5 years. GST still applied. The 5 year rule has a literal rule of ONLY being used to produce rental income in the 5 years. If its still on market while rented out the clock does NOT keep ticking. Thats because there was both a creditable purpose (sell it) and also a input taxed issue (rental)