gst

[woohoo]

I have a gst question, wonder if anyone here can answer it.

My company is not registered with gst. It is a project managing company I am starting out. Income I presumed less than $50,000, so not registered gst.

I had bought a land as my first investing thru the company, and selling it off.

The ato website says gst is payable if
-it is the entity's main business [which mine is not]
-IF the entity is registred for gst at the time of sale. [disregarding if selling land is the main business or not] [mine is not registered]

I called the ato last week and they said if any of the 2 conditions apply, then gst applies.

BUT, seeing that another condition for gst is that if an entity's income(or is it revenue/profit?) is over $50,000, then it has to have gst. IS THIS CORRECT?
I am selling my land for more than $170,000

Does it still apply? Is there a loophole here?

[Merovingian]

How much does it cost to register the company for GST?

[coastymike]

With respect to GST turnover the average annual turnover must be greater than $50K. You would meet this definition if your turnover was $170K from the sale of your developed land.

Section 40-65 of the GST Act provides that the sale of real property is an input taxed supply, but only to the extent that the property is residential premises to be used predominantly for residential accommodation. However, the sale is not input taxed to the extent that the residential premises are commercial residential premises or new residential premises.

Residential premises are defined in section 195-1 of the GST Act to mean land or a building occupied or intended to be occupied as a residence. This definition requires that land must have a building affixed to it and that the building must have the physical characteristics that enable it to be occupied or capable of being occupied as a residence.

You don't state whether you have a residential premise on the land. If you don't then land is not exempt under Section 40-65 of the GST Act.

You can make a taxable supply from an isolated transaction. However, it does not extend to the mere realisation of an investment asset. Hence, the selling of an asset may not of itself amount to an enterprise, but account should also be taken of the other activities leading up to the sale to determine whether or not the sale of the asset is an enterprise of itself or forms a part of an enterprise.

You will need to provide your accountant with all the facts and let them make a decision. Sorry GST is never simple. In fact nothing in tax is ever simple.

By the way if you ring the ATO helpline three different times there is a good chance you will get three different answers. Remember FeeFee from TripleM used to work on the ATO helpline.

[patdavie]

As an addition to coastymikes comments, I like to write to the ATO giving them my TFN and full details including my argument for the outcome I want (if I want them to go in a particular direction).

It is a cheap way of getting reasonably reliable advice - they have to reply in writing. Calling the ATO for advice is dangerous - they are totally unaccountable and will literally tell you anything - I am speaking from experience on this point as I went through the whole GST & property development exercise sometime ago.

[pennyk]

I would also have a think about whether you want to use a company as the vehicle for purchasing investment properties/ land etc in the future. The advice I received from my accountant was that it was a particularly messy way to do property investment and we should avoid it.
There is no cost to register for GST and if you are carrying on a business, I would recommend you do that. As a small business, I found it extremely frustrating to work with companies that were not registered and it gives others the impression that your company is not very significant and not making much money.
You should really work out the GST before you sell it, so you can factor GST into the price of the property. If you are selling as a commercial investment, then the company buying is likely to be claiming back as an input tax credit. But if you sell to an individual, it will effectively cost them more. But if you don't include it in the sale price, you will need to pay the full cost of GST and you will lose money.

[woohoo]

Hi guys, thanks for your responses.
Much appreciated.

The land is a residential block of land, not farming land.

I would like to apply a margin scheme, and not taxable supply. I think taxable supply means got to pay 1/11 of the sale price to ATO, while margin scheme is 1/11 of the revenue?

[JoannaK]

I may be wrong here, but I thought the vendor can only elect to use the margin scheme if the property was held by the vendor on 01/07/2000....perhaps someone can confirm this...

[Mry]

Man the ATO gave you really bad advice.

Strictly speaking, using the margin scheme means 1/11 of the difference between the sale price and the price of the land on the contract for purchase. You cannot reduce that margin by other items. You don't need to have to own the property on the 1/7/2000, that was a GST transitional provision in the margin scheme.

Make sure you agree in writing prior to settlement that the margin scheme will apply with the purchaser.

Register for the GST for free online at http://www.business.gov.au over on the top right.

[woohoo]

whoever that came up with the idea of having gst in australia ought to be spanked in the bottom!!!!

[Merovingian]

Whoever promised that the GST would replace stamp duty on purchases like houses and cars, and then forgot about it, (here we are, now 6 years later), ought to be shot.

[NedKelly]

We had a similar situation and got a private ruling in the end as no one, ATO, accountant, estate agent or financial advisor could give us a straight answer. The ruling said we had to register for GST. It is really a load of nonsense because any extra GST we will pay will reduce the sales price of the land which means the CGT we will pay will be lower. In the meantime we have created a ream of paperwork, incurred accounts costs and the government is no better for it. Except I suppose it creates employment.