Question for all you gurus out there,
i have been getting conflicting information and feedback regarding GST implications if you are viewed as carrying on a business in development.
If the homes are viewed as trading stock – i understand there is GST applicable.
with relation to new build – there is no GST on the land component – only on the Build – but is GST applicable on the way out on the whole project value.IE build
200k land component (no GST)
220k build – GST applicableOn sell price – 450k – is GST applicable to the whole project or just the build component
If you haven't paid and claimed a GST credit on the purchase, then you can use the 'margin scheme' to reduce your GST liability on the sale.
If you bought the land after July 2000, using the margin sheme would mean that you would pay GST on the difference between the sales price and the original cost price.
From your example above, The GST would be payable on $450 – $200.
"If you haven't paid and claimed a GST credit on the purchase, then you can use the 'margin scheme' to reduce your GST liability on the sale."
Do you mean on the Land component??
So the onsell would have a gst component payable on the whole ammount minus the original purchase price of the land component
Laws are very specific when you go to onsell on what must be in the contract of sale. It must specifically state that the margin scheme is used or you will be liable for GST on the total value. Don't just assume that you are eligible to use the margin scheme.
Cheers Matt,
I am still finalising contract so this is another clause that i will keep in mind for it.
it is growing day by day at the moment.Seek specialist tax advice in this case as the law is still under question.
Refer to Sunchen P/L v FCT [2010] FCA21 where a developer was not able to claim the GST paid on a leased resi site with a DA in place as it was a leased residential premises and was an input taxed supply. The judge followed the previous Toyama case which called for a prediction of what may happen in the future, ie the purchaser may or may not develop the property and therefore could not grant the claim for GST paid. This is now under appeal.
If you haven't claimed any GST on the purcahse, and you have to pay GST onthe sale, then you are eligible to use the margin scheme. Depending on whether you bought the property pre or post July 2000, there are different ways to work out your 'cost' for margin scheme purposes.
If it was post July 2000, then the cost for margin scheme is what you paid for the property.
The above case relates to claiming a GST credit on the purchase,and is not a margin scheme issue. It's an input tax or taxable supply issue.
You need to advise the purchaser in writing that you are electing to use the margin scheme. This is usually done with a clause in the contract.
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