We currently have a company trust stucture and buy properties which need renovations. One of the beneficiciaries of the trust is a director of his own building company and we use his company to carry out the renovations.
As our investing company is not GST registered we are not able to claim the GST on the renovation costs. But we are hearing stories that we may be liable to pay GST on the sale of these renovated properties.
Can anyone give us any advice.
Confused.
A few things you and your accountant will need to ascertain. Firstly you will need to determine whether the renovations result in the supply of “new residential premises”. If they do result in a taxable supply of “new residential premises” – note that this will be based on the facts at hand – then you may possibly be liable for GST.
However subsection 40-65(1) of the GST Act provides that a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation.
According to subsection 40-65(2) of the GST Act however, the sale is not input taxed to the extent that the residential premises are:
– commercial residential premises, or
– new residential premises other than those used for residential accommodation before 2 December 1998.
That is why you need to sit with your account and determine whether the renovations result in “new residential premises” or not.
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