Hi everyone I just got some question for GST.
My company bought a block of land and sub divided to 4 and sold all of them.
The land cost was $1 million and we sold all the block with new house for 2.83 million.
I didn't know there will be GST involve with sale of new residential property.
And now we end up paying $257,272 for GST.
I'm just wondering is there any off set or deduction we can apply on this?
I just don't understand that we have to pay capital gain and GST….
The ato has applied 1/11th of the sale to gst. You need to offset/claim all your gst inputs if you haven’t already claimed them. Time to see your accountant.
Of course you have to pay capital gains, you have made a capital gain!! I am not sure of the ins and outs of the GST issue, but I believe that you always have to pay GST when creating new titles.
Did you purchase the block in your own name or in a trust? And are you going to make any profit after paying capital gains tax and GST? I would be interested to know how you go.
Cheers,
LukeI agree with IP freely, you should see your accountant. By using the margin scheme you should end up paying a lot less than $250k in GST.
Hi MUW009
I am no expert on this and you really need to seek some advice from a good accountant/solicitor.
I can share what we did last year when we built two units and sold them – We had to charge GST on our new residential properties but we used the margin scheme – whereby GST is not applicable to the portion of the sale price equivalent to original cost of the land (which had no GST at the time of purchase). Our solicitor assisted us with the process and we sorted it at the time the sale contracts were drawn up. (Don't think we would have been able to do it if a previous owner had used the margin scheme.) When lodging our BAS we claimed a credit for the GST on the inputs for the building costs as we did it in an entity which was registered for GST.
Good luck – you certainly don't want to pay more than you have to.
Regards, TraceyThank you for everyone.
BTW I got message from my accountant said that I can apply magin scheme.
It is because when we purchase the block, the seller didn't apply margin scheme for this.
I'm really confuse about the margin scheme….
muw009 wrote:Thank you for everyone.BTW I got message from my accountant said that I can apply magin scheme.
It is because when we purchase the block, the seller didn't apply margin scheme for this.
I'm really confuse about the margin scheme….
This is a prime example of why people should see their accountant BEFORE signing the contract, or setting up theior business.
If you have entered into the development with a purpose of selling (which it looks like you have), then you will be liable for GST.
However, it also means that you can CLAIM GST on all of your building expenses. (From suppliers who charge GST, some items will be GST free)
When selling, you should have chosen to apply the margin scheme. The margin scheme basically means you pay 1/11th GST on the difference between the contract selling price and the contract purchase price. If you sold for $2.85m and bought for $1m, you would pay 1/11th of $1.85m, or $$168,181.
You will need to check the contract of sale, because the purchaser needs to be made aware that you are intending to use the margin scheme. If you haven't notified the purchaser on the contract, you may be up for 1/11th of the total sale.
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