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Split owned Commercial IP & GST

Discussion in 'Accounting & Tax' started by MokeMum, 9th Sep, 2015.

  1. MokeMum

    MokeMum Member

    Joined:
    16th Jul, 2015
    Posts:
    5
    Location:
    Sunny Coast Qld
    Can the brains trust shed any light on this for me?
    We have a 25% share in a commercial IP owned with 2 other parties (25/25/50 split).
    Property has been owned since pre GST days, so none paid on purchase.
    Both 25% owners are GST registered - 50% owner is not.
    Considering implications of sale....currently has a long-standing tenant in place but no tenancy agreement (I know....don't get me started!) and may become vacant.
    If sold when vacant:
    1) Does GST have to be applied to the whole sale, given 50% owner is not registered?
    2) Are 25% GST registered owners liable to pay GST, given that there was none claimable on purchase?
    There will be CGT implications, so the extra 10% is a serious consideration. I'm thinking it may well be sensible to find an alternative tenant before sale, so it becomes a 'going concern'.
    What do others think?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,563
    Location:
    Sydney or NSW or Australia
    How is the tenant invoiced for rent? With gst or without?

    Is it owned in partnership with % or in another vehicle?
     
  3. MokeMum

    MokeMum Member

    Joined:
    16th Jul, 2015
    Posts:
    5
    Location:
    Sunny Coast Qld
    No GST has been claimed on rent (hasn't changed since pre-GST days).
    The tenant is a related entity and just pays without invoice (yes, I know !??*!)
    Ownership is %
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    Is there an enterprise - Yes.
    Will the enterprise make a supply that exceeds $75K if the property is sold ? Yes.
    Therefore the enterprise may be required to remit 1/11th of the supply to the ATO as GST.
    The issue of no GST previously is of no concern. GST applies after 1 July 2000.

    Then the ENTERPRISE (ie the THREE owners in partnership) require a ABN before a sale and must contract in a manner that considers GST. The individual owners ABN etc is a red herring. The buyer may require a tax invoice and would make enquiries and may seek a GST clause that covers the contingent liability if GST was ignored / unpaid.

    If sold vacant then the going concern basis cannot be used to sell the property GST free. A strategy to sell with a tenant under a suitable short term lease should be considered.