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New investment - farm land. Collecting the rent...GST?

Discussion in 'Accounting & Tax' started by roadworthy, 28th Sep, 2015.

  1. roadworthy

    roadworthy Member

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    This is a bit of a newbie question.

    My wife and I have never owned any investment properties or anything much before, but we've recently purchased some farm land as an investment, and leased it out to another farmer for a fixed rate per year.

    The lease talks about rent figure being "expressed exclusive of GST"
    and "Liability for GST (payable in respect of any taxable supply) is additional."
    and "The lessor must give a Tax Invoice to the lessee for any taxable supply under this lease."

    So when it comes to asking the lessee for the rent, do I need to create a proper Tax Invoice or anything? And does one normally need to add GST?
    Or do you normally not need a Tax Invoice at all, just send them an email saying "Please pay the rent of $X, my bank details are....."?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Are you registered or required to be registered for GST?
     
  3. roadworthy

    roadworthy Member

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    I have an ABN from a photography business I once planned to start (but never did). Wife has one for similar reasons. We don't currently use them for anything. My wife and I are just normal salaried employees, with TFNs.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That didn't answer my question so I presume you are not. If you are not registered you cannot collect GST. What happened on the GST on the purchase?

    You may be required to register.
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The owners of the land must register for a ABN for the enterprise of the farm. And if annual rent etc is expected to exceed $75K then also register for GST. All rent is taken to be inclusive of GST even if unregistered. Yes, you may need to issue tax invoices. You may also claim GST on costs.

    When you bought the farm you likely bought it under the going concern method and were unable to claim any GST but this should be checked.

    Time to see an accountant / tax agent for advice before problems snowball.
     
  6. roadworthy

    roadworthy Member

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    Just checked the contract of sale - the farm land was "GST-free because the sale is subdivided farm land or farm land supplied for farming under Subdivision"
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Will the rent exceed $75k/annum?
     
  8. roadworthy

    roadworthy Member

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    The rent isn't much - less than $16K per year
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    An ABN is still needed
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    OK - Good you checked not all farms are fully exempt. No issue.
     
  11. roadworthy

    roadworthy Member

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    So does what you said about needing to register for an ABN still stand?
    And the need to create tax invoices?
     
  12. roadworthy

    roadworthy Member

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    Okay - all good. Got the info straight from the horses mouth (ATO) today.
    So it turns out I need to apply for a partnership ABN, but, as the rent won't exceed $75K I won't need to register for the GST.
    So once I have the ABN, I just knock out an "Invoice" in in MS Word, wizz it off to the tenants, and sit back and watch the dollars roll in ;-)

    Thanks chaps for your help!
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I didnt expect to be wrong. Of course you cant claim gst on your expenses either.