Rent out new property to sister - GST 5 year rule

Alex built 3 brand new units with the intention to rent them out for 6 years (then maybe sell them). He wants his sister Lisa to stay in one of the units. Although he prefers Lisa staying for free, in order to meet the GST 5 years rules,

Alex decides to obtain rental appraisals from 2 to 3 agents, and set the rent within the appraisal range.
Sign a standard Residential Tenancy Agreement with Lisa
Lodge bond
Prepare a condition report
Purchase Landlord insurance
Obtain rental appraisals once a year to update the new rent and renew the Tenancy Agreement.

Is it the right/proper strategy to rent out to family and meet GST 5 year rule? or is it better to be rented out to Lisa through a registered Real Estate agent?

 

There is no right or wrong, it will depend on the circumstances. Renting doesn't effect the GST 5 year rule.

 

Thanks Terry, I don't understand - Renting doesn't effect the GST 5 year rule. Lisa will actually stay there for 6 years continuously.

 

What does the 5 year rule say?

 

A residential premises is no longer new if it has been 5 years since:

• it first became a residential premises
• it was last substantially renovated
• it was built to replace demolished premises

 

so what are you trying to do by renting it out?

 

ok, I might be wrong. for the sale of unit not subject to GST, I thought it has to be 'by way of rent' for 5 years continuously.

 

Is the rental a Lease ? If not ? Again you seem to be chasing numerous threads to avoid tax. Seek personal advice. I suspect avoidance issues.

Renting to your sister may not likely meet the GST outcome you want.

GST applies to a first sale even if rented. Often.

 

What is the intention for the other 2 units? Lisa will be in one of them for 6 years but you haven't made clear whether the other 2 are sold prior to the 5 years or not.

 

Might also be some issues with deductibility if renting below market rent