Hello guys,
I am really confused with the GST thing even after seeing an accountant today.
If anyone can help, that would be really appreciated.I am planning to have a trust set-up for my property investment.
In addition, I use a company as the trustee.
I am just going to use “reno and sale” for quick cash. -> doing cosmetic reno onlyDo I claim the GST charged by my tradies?
Does GST then include into the house sale price?
Cuz it’s a business, it would make sense to claim the GST and be charged.
But the house is not the new house, hence there should be no GST involved when you sell (?????)Thank you heaps for your help!
Residential houses are generally GST exempt so there is no GST on the sale – except for new property. The definition of new includes properties substantially renovated.
If your trust is registered for GST then you could claim the GST on the items purchased if you were substantially renovating the property but if not then you could not claim any GST on items. Thats my understanding but it is complex and confusing.
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
i had a similar question… but found some good answers in Wrightbooks, The Taxpayer Guide, the 2008/9 edition included a whole section on gst and real property with many relevant case studies
It will make little difference in the end. The selling price is not adjusted because you paid gst, purchaser doesn’t care. Whether you claim the gst inputs will affect your gross profit or cgt payable.
If you are doing a cosmetic reno only, then no, you can't claim any GST, and you don't remit any GST on the sale.
If you are doing a substantial reno, you could be creating a 'new' building for GST purposes, and you would have to remit GST on the sale of this building. THis is because it would be deemed a new building under the GST Act. With a substantial reno, you would be able to claim GST on tradies, building supplies etc.
Your intention and actual use of the property also comes into account in determining whether or not you can claim GST.
If you do a substantial reno which results in a 'new building' (as determined by the ATO) and you originally intend to, and in fact do, sell the property within 5 years you can claim GST. You also have to pay 1/11th of the sale price as GST.
If you do a substantial reno which results in a 'new building' (as determined by the ATO) and you intend to rent the property and in fact do rent the property you don't claim GST. If you were to sell the property within 5yrs you will still have to pay some GST on the sale.
Things get even more complex if you intend to sell but later down the track you decide to rent.
Two key things you need to be across if you are doing a reno regarding GST;
- will the reno result in a 'new building' in the eyes of the ATO
- what is my intention once the reno is complete, rent or sell (document this in case of ATO audit or your intention changes i.e. you reno'd to sell but the market was terrible when you finally completed the reno)
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