Hi Guys,
I'm doing my first development. A simple knockdown of an old house and building a duplex, with the plan being to sell both.
My accountant has advised that some GST will be payable on the gap between the price of the original dwelling, and the total amount that the project sells for. The margin scheme will help reduce this.
But I've heard that with your first development, there can be a slight loophole, where if you "intended to live in the properties" at some point you could avoid the GST.
I do have an ABN, and my acc registered me for GST, but I haven't lodged anything yet.
Any advice would be great!!
Dean
All new residential property is subject to GST. The GST act defines new as being substantial new and and less than 5 years old building a house would qualify as new. I know of know exemptions for main residences. I think the only way around it is to hold it for more than 5 years.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Great thanks Terry,
You spoke of exemptions for main residences, could I claim I planned to live in one of them? and only pay GST on the other.
For example, would someone who built a new home as their PPOR, and then sold six months later, be liable for GST.
Sorry if I'm labouring the point, as I know you did say there were exemptions for main residences. It's just that if there's any loophole I'd like to explore it.
Cheers
Dean
You only have to charge GST when you sell. Whether main residence or investment before that doesn't really matter I think.
If you want to claim GST, then it is an investment property you would claim it as part of the cost of construction I would think. If it is a main residence then you wouldn't be able to claim it at all.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
you pay GST on the sale of the building, but during construction you can claim the GST of the materials and services to build the duplex in the first place… so have to work out both and see if it is actually that bad. also take into account the time value of money, 100 dollars saved during construction, is worth more then 100 paid when selling the property, because that 100 saved, can be used to make money during the time between construction, and sale.
“No GST is payable on the sale of existing homes by individuals. It doesn’t have to be a principal place of residence.”
“GST is payable on the sale of new houses and new land and all non-residential land and buildings (new or established) by registered businesses (see exceptions and choice of method of calculation)”
So if you buy it under a registered business, you will have to pay GST. as the business will own it.
This is just from some quick research i just did though, i’m no expert on any of this.
Great thanks for all your help guys!
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