guys, what do we need to note about gst in developiing?
Is it true that we must pay gst if we develop and sell within 5 years? (even if our company is not registered for gst?_
Any way to reduce that?>***********************
hi fullout,
I think your still liable for gst,If your company was gst registered at least you could claim it back through your expense’s.
I’m sure it wont be long before an accountant comes to the rescue.
cheers
Joseph Scarcella
prime real estate agents
property management specialists E: [email protected]yes unfortunately developers don’t get a special exemption from GST and you can’t deduct it – it’s a tax just like income tax etc. If you apply the margin scheme you won’t pay GST on the amount that you paid for the land. The net result of this is that you basically pay 1/11th of your profit in GST. The other 10/11th’s is assessed as normal assessable income (be it in a compnay, trust whatever. note that developers cannot take advantage of the CGT 50% concession).
the ATO website provides fully worked examples.
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
ps – if you are liable to pay GST and you haven’t registered you will be committing an offence. make sure you understand the thresholds that require you to register
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
The Margin Scheme
This is the key. The greater the val on your land the less GST you pay. Have your land re-valued for Margin Scheme purposes when you are ready to commence – this means that it may well be valued far above what you paid for it. This represents a way to reduce the GST component of the final sale.Also, dont forget that the GST payable on the sale is:
the difference between the land and the final gross realisation, less any GST component on your expenses.As Ausprop said “you basically pay 1/11th of your profit in GST”. Just remember that this assumes you are getting GST credits on your project costs.
BTW, interest, bank charges and council charges do not attract GST. Neither does 2nd hand materials purchased privately.Commercial Property:
A commercial property sold as a “going concern” is considered a taxable supply by a business. When you purchase such a property you recieve a GST credit on the entire purchase price! In this circunstance you do not elect to use the Margin Scheme. It is is up to the vendor to elect if they want to sell the property as a going concern or under the margin scheme.5 Year Rule
Yes, GST is not payable on a developers property held for more than 5yrs. If it has been rented during this time it is treated as an investment by the developer and not as trading stock. This means that you can not cliam the benefit of GST credits while constructing the property. The sums need to be considered as each option has its own benefits.That all makes sense JWT, except for one important thing: the value of the land is irrelevant… the margin scheme is only concerned with what you paid for the land (unless you bought the land before 1 July 2000). Here is the extract from the ATO website:
What is the margin scheme?
The margin scheme is an alternative method of calculating the GST you pay when real property is sold by a registered business. It allows the seller to choose to pay GST equal to one eleventh of the margin for the sale of real property, rather than one eleventh of the total selling price.
Methods of calculating
For real property purchased on or after 1 July 2000, the margin is the difference between the selling price and the price paid to buy the property (consideration method).
For real property purchased before 1 July 2000, the margin is calculated using one of two methods:
the difference between the selling price and the price paid to buy the real property (consideration method), or
the difference between the selling price and a valuation of the property at the relevant valuation date, usually 1 July 2000 (valuation method).
Methods of valuing real property bought before 1 July 2000There are five valuation methods available. The method you use will depend on whether the premises was completed or partly completed on 1 July 2000. For more information on what is a completed or partly completed premises and the different valuation methods refer to GST ruling GSTR2000/21 by visiting http://www.ato.gov.au:
No valuation is required for real property purchased after 1 July 2000 as the margin is calculated as the difference between the selling price and the purchase price.
Who does it affect?
Sellers
If your business sold real property and chose the margin scheme, the GST you pay is one eleventh of the margin rather than one eleventh of the total selling price
PurchasersIf your business purchases real property under the margin scheme you will not be able to claim a GST credit
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
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