We purchased a block of land which we intend on subdividing. We purchased the property using a discretionary trust which was registered for GST and therefore paid GST on the purchase price.
I have been given conflicting information regarding the requirement to pay GST. Are we correct in assuming that we need to pay GST on any blocks that are sold? If this is correct is the GST simply calculated on 1/11th of the sale price of the subdivided blocks?
TIA
For a normal development GST is calculated using the Margin Scheme. The legislation relating to the Margin Scheme was amended in 2005.
In broad terms, the buyer and seller have to agree in writing to apply the margin scheme.
GST is calculated on the margin between the Gross Sale Price and the Gross Purchase Price. I.e Property purchased for $100,000 and sold for $250,000. GST under the MS is calculated as 1/11 of $150,000.
During the development Input credit are claimed along the way.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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