Advice required on GST & Capital Gains tax on an investment property

[The Trump]

Hi guys

I have my own PPOR but and I am looking to buy an investment property (ie. in my own name).

The property that I am looking at has an existing dwelling on it however it also has a permit approved for a separate home to be built at the rear of the “existing” property.

If I went ahead and did purchase I would be looking to undertake the renovation’s required to the existing house as an owner builder. Then in terms of the construction of the “new building” at the rear of the “existing” home would utilise the services of a registered builder to construct.

Upon completion (ie. the renovation & the new build) would look to re-sell both of the properties.

If I was to adopt this structure would I be required to be registered for GST (in particular for the new build) given the property would have bought in my name at the time of purchase?

I think that this may be the case given that it would be an enterprise and I would assume GST would apply to the construction of the “new” home however GST wouldn’t be applicable to the “existing” house. Can anyone confirm that this is correct?

Secondly I assume that the GST that I would be required to pay to the builder for the construction on the “new” build would be claimable?

Then when it came to sell the “new” property I could apply the margin scheme (ie. deduct the cost of the land off the sale price and divide it by 11 to work out the GST liability on the construction of the new property).

Also assume that both properties would be subject to Capital Gains Tax. However how would one work out what the cost maybe to calculate what might be payable on both properties.

Look forward to anyone’s advice/tips as to how I should structure and what I may or may not be up for.

Thanks

 

[Brady]

With tax if it doesn't smell right, its usually not.

Suggest speaking to / paying a professional to ensure you are getting the correct advise

 

[MRO]

If you plan to rent out the newly constructed property then GST probably isn't relevant. If you rent it for 5 years then it is not considered new and gst would not apply to the sale. This means you cannot claim gst on the building costs but also don't have to pay GST on the sale proceeds

Very generally, if gst applies to the sale then it will be considered ordinary income rather than CG.

You have a good basic understanding but it would be good for you to clarify your longer term plans then get some formal advice.

 

[Ausprop]

the level of renovation to the front house could deem it to be new residential premises