Hi All,
Just reading thru Steve’s Wealth Guardian workbook and came across the above section – my question is –If you purchase a new property (ie buy land and build house) can you claim back the GST component of the cost price from the ATO if you intend to hold and rent ? or is it only claimable for situation of no rental and you immediately onsell?
If you can claim the GST back did you have to be registered for GST prior to the purchase or can you register after the purchase and then claim it back ?
Thanks
MIKALA
Hi Mikala – I have been deliving around a lot on this subject lately and I would say:
if you plan to hold and rent it you can’t claim the gST back.
GST can be retrospectively adjusted but I don’t think it will apply in your case anyway.
http://www.megainvestments.com.auJohn Carroll
Hi there Ausprop,
Thanks for your reply but the more I read on it seems that the situation of new building purchase or major renovation means that you could claim the GST back or at the very least claim the GST component of your purchase cost as a tax deduction – if this is the case then I’ll be organising some tax return amendments pretty quickly….can any other forumites assist here?
Steve , it’s your book – have I understood correctly ?…..MIKALA
Mikala,
GST is claimed back through regular business activity statements,not claimed as a tax deduction.I would suggest that if you don’t have an ABN and are not registered for GST when you purchase,then you won’t be able to claim it back.Tools
Hi Tools,
Thanks for the reply – the following is straight out of the WealthGuardian workbook –
The GST is generally not applicable to residential property, so any GST paid in relation to residential property investing cannot be claimed back. However while not refundable, a tax deduction is allowed for GST amounts paid.
The exception to the rule is where a new property has been constructed, or a property has been substantially changed through renovation. In this case GST is applicable on the sales price, and any GST paid in the construction or renovation process can be reclaimed.
I have paid GST on both my IP’s and I am wondering why tax agents or accountant have not advised that GST paid on new properties can be claimed back or claimed as a deduction.
What are you thoughts on the excerpts from WealthGuardian…
MIKALA
Hi Mikala,
Sorry, I probably didn’t explain myself too well.For a residential property where you incur expenses that include GST and you are not registered for GST,you claim your expenses as a tax deduction including the GST paid.So if you buy something for $11,you claim the expense as $11,not as$10 and $1 GST.Naturally though,all you get back of that $1 in GST you have paid is the amount of your tax bracket,not the full dollar you woul dget back if registered for GST.Sorry to have led you astray.Tools
yes 2 distinct things happening here:
1) if not registered the gross price e.g. $11, can be claimed as atax deduction. in this scenario you are probably talking about depreciation spread over many years.
2) you are a developer regostered for GST. so you buy a block for $110k, claim back your $10k, then build for $220k, claim back your $20k, then sell it for $440k, pay $40k GST, so it has cost you $10k. the other $100k goes into your persoanl tax return so you lose another 50% or so there, nett profit approx $50k.
If you held the investment you would have an equity of $110k with no tax bill.
http://www.megainvestments.com.auJohn Carroll
Hi Ausprop,
I’m still confused –
1st secnario – Not registered for GST
If I bought a block of land for say $99,000 and included in that cost was $9000 GST then build a house for $99,000 and there is $9000 GST in that cost can I then claim back $18,000 ?
If not, can I then claim $18,000 as a tax deduction?2nd scenario – After purchasing the above I register for GST (having not claimed the $18,000 as tax deduction) can you respectively claim back the $18,000 paid in GST ?
3rd scenario – I am registerd for GST then purchase as above can I then claim back the $18,000 ?
In all of the above the investment is held and rented after the purchase.
MIKALA
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