Hi All
I am purchasing a corner store (the building) with 3 bedroom residence attached.
The price is $160,000 with the 2 halves currently getting $140pw each = $280 pw rent = close to positive gearing
The shop has a well established general store on the outskirts of a large rural town on one of it's main roads.
I don't think the general store owner is going to pack up and leave in a hurry, unless he sells the business as a going concern.
The Store owner currently pays GST on his rent to the previous owner and just claims it all back in his tax return = nill effect.
The real estate suggests that because I'm not a business myself, I don't need to charge GST and don't need to bother with it.
If I collect the GST, I'd have to put in a BAS every quater with the added hassle/expence that involves.
Can I legally not collect GST?
Is there any advantages to registering for GST and doing a BAS quarterly?Thanks in advance for any help
John
i may be wrong but as i understand it, you would have to pay gst to purchase the property. if your income from rentals is less than $75,000 you don't have to be registered/pay gst . however, i believe that you can still register, claim back the gst that is payable on purchase and then deregister after purchase.
can someone correct me if i am wrong please?
DO NOT TAKE ACCOUNTING ADVICE FROM A REAL ESTATE AGENT!!
Get accounting advice from an accountant who understands property accounting issues.
I could recomend
http://www.bantacs.com.au/index.htm
Julia Hartman is a regular contibutor to API magazine and has a internet advisory service for a small charge. I found the advice she gave me about GST and purchace of commercial property to be quite comprehensive with ATO precedents and ruling examples from what I have
Based on my purchase of a commercial property, weather you pay/collect GST will depend on many factors including if purchaser and/or vendor is registered for GST.
My personal opinion, not as an accountant, is that if you follow the advice of give90, you run the risk of the ATO demanding you pay them GST on the purchase of the property when you deregister.
BE CAREFUL!! GET ALL THE ADVICE YOU CAN BEFORE FINALISING THE PURCHASE!!
as i said, i wait to be corrected but my understanding is that if your income is less than $75,000 (that is the new threshold i think, it was $50,000) you can register for gst, buy the property, deregister and claim it back. that was the advice that i was given in 2002 when i bought an industrial but i didn't deregister as the rent was approaching the (then) $50,000 threshold. so i haven't proven it which is why i asked for rebuttal. even i think it sounds too good to be true…..
If you are registered for gst, the property is a going concern ie currently leased, you will not pay the gst on purchase (&/or be able to claim it back – you must meet the 5? prerequisites).
Send your query to [email protected] ie the ATO who will give you the appropriate answer (which can be relied upon).
My advice is get professional advice, do not rely on a real estate agent for tax advice.
Your first step is to determine whether the purchase is a taxable supply, or what portion is a taxable supply, because of the split use. Also, determine if the seller is using the margin scheme. If he/she is, you won't be able to claim any input tax credits on the purchase anyway. Also, if it is a sale of a going concern, there is no GST on the transaction
You must register for GST when your turnover reaches $75,000, but this does not include the residential rent, only the commercial rent.
Is the $140 free of GST, or does that include GST. If it includes GST, the current owner is really only charging $127.27 per week, as he is sendin 1/11th off the ATO. If you don't register, the tenant will effectively be paying an extra 10% if you continue to charge $140, as they don't get the GST dcredit. (If it is $140 + GST, and you will continue to charge $140, this is irrelevant)
But first, check the contract for mention of the margin scheme and / or going concern, and when your real estate agent starts talking tax, BLOCK YOUR EARS!!
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