If a buy a property for 300k (with house on it). Knock it flat, and build 3 houses – each of which sell for 300k (total sales price = 900k). If my total costs (excluding GST) – but including all other council contributions / holding costs / build costs / sales commissions etc come to 600k.
Then what GST will i be having to pay?
1) 3 x 30k ? (10% on each dwelling sold)
2) 1 x 30k ? (10% on my profit)Can any one advise?
Cheers Wobblysquare.
You will be selling new units so 1/11th of the price on them would be GST.
Against this you would be able to claim any GST claimed.
You may also want to look at the margin scheme
Not sure if the demolition can affect thngs such as GST, it will affect CGT.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
thanks for comment. Led to this link from ATO, which covers it fairly well.http://www.ato.gov.au/content/downloads/BUS00271328n73740_02_11.pdf
good find wobbly nice easy to understand examples
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, when do they become old enough that GST is no longer applicable?
I understand it's 5 years, but I'm not sure.Yes, 5 years I believe.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry.
I reckon there's a strategy there.
The greatest depreciation benefits are also over the first five years.
So, for a developer, it may make sense to hold for 5 years, in some cases.Christian,
5 years is a long time! You would be better off in some sense, but also could be better off in selling and doing another project (or 2) in the meantime.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
My understanding is that it is 6 years…although maybe I am confusing this with PPOR CGT exemption. However i also think it is not necessarily limited to this. ATO have, on occasion, still asked for GST on developments sold after this period.
wobblysquare wrote:My understanding is that it is 6 years…although maybe I am confusing this with PPOR CGT exemption. However i also think it is not necessarily limited to this. ATO have, on occasion, still asked for GST on developments sold after this period.Wobs
http://www.austlii.edu.au/au/legis/cth/consol_act/antsasta1999402/s40.75.html5 years according to the GST act
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
The strategy I was considering is to hold all or part, and collecting a yield, over five years.
Thanks for your feedback.Great strategy if you have the cashflow to support it.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Wobblysquare,
GST as I understand it, it’s only payable if you were the builder and did not paid GST when buying materials.
If you however, hire a building company to build it for you, GST is not payable as was payable to the company.Regards,
Giovanni
I think the 5 year period of gst only starts after the completion of the dwelling and that its been signed off. so it could technically be 6 years if you built it with a 12 month build contract.
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