Hello,
I hope someone can clear this up for me.
I always thought that when selling a newly built property (where GST applies), that to calculate GST, 10% of sale price is the amount. From which you can claim back gst from the build.
However a friend tells me that GST is now worked out using the ‘margin scheme’, where GST is only calculated on the added value to the original property. eg if you bought thre original property for 300k, rebuilt and then sold for 500k, then GST is only calculated on the 200k of added value. Which in this example would mean 20k from which you could claim back GST on build costs.
Is this true?. If so the GST sting is much less .
Gavin
Hi Gavin
The Margin scheme can become very complex, very quickly. In essence the margin scheme is desinged to give tax relief to developers.
I would suggest that you run your specifics past a very, very good accountant., as in certain situations MS can not be used. I also believe that a purchaser can not claim back the GST credits on a property purchased under the margin scheme.
By the way GST is calculated as an 1/11 of the margin. Development costs are not used in calculating the margin.
Good luck!!!
Regards
Investor1313Thanks for replying 1313,
When I say claim back GST on build costs I am not talking about it as a purchaser, but as the developer. The build costs have a GST component in them, and as I understand it, you claim them when paying GST, so as to not pay that component twice.
Gavin
Yep.[suave2]
Regards
Investor1313Hi, I a new to this GST and property development stuff. I am interested in understand how you say you can claim back the GST. How is this possible as a developer? Can you be an individual investor or do you need to be a company?
We find comfort among those who agree with us – growth among those who don’t. Frank A. Clark.
Let us try and simplify it for all.
Assume as a developer you purchase a property which you demolish and the land ends up costing $400,000 on which you intend to construct 4 Townhouses. Cost base for each block would be $100,000
These Townhouses cost $100,000 to build and their is a further $50,000 in other expenses of which $30,000 have GST applied to them.
As the developer goes along each quarter he can lodge a claim to receive back the GST he has paid along the way. Eventually he will have lodged claims to receive back GST on $130,000 which is equivalent to a Tax credit of $11,800.
With a total cost of $250,000 the developer looks to sell the Townhouses at $350,000. When the sale occurs (ignoring any agents fees etc where there will be a GST credit) the GST payable will be $400,000 – less the original cost base of $100,000 meaning that CST is payable on the margin of $250,000.
The GST payable will be $300,000 / 11 = $27272
As he has received a credit along the way of $11,800 the total GST paid on margin = $27,272 – $11,800.
Hope this clarifies the matter.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
