Put it this way - If you have to pay gst, then you have to be registered for gst.
Do full-time developers hold stock?
- Thread starter MTR
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Put it this way - If you have to pay gst, then you have to be registered for gst.
That's confusing. If I build two units, rent them out for more than 5 years and then sell them, I don't have to pay GST. They will be built by a project builder. Do I need to register for GST? Will the project builder include GST in the contract price that I can claim back?
you obviously create a company and then buy the land which you wish to subdivide and claim back GST etc.
Doing one now 3 units in eastern suburb - all cash no loans, helps with negotiating a lower price with the agent and vendor
i also know of a guy from hong kong in his later 40s who does this full time for the last 10+ years. buys subdivision like close to 70 houses, buys and sells all the time as his full time job.
Doing one now 3 units in eastern suburb - all cash no loans, helps with negotiating a lower price with the agent and vendor
i also know of a guy from hong kong in his later 40s who does this full time for the last 10+ years. buys subdivision like close to 70 houses, buys and sells all the time as his full time job.
Well, it's already too late because I already own the development site as an individual with an investment partner (50/50). We are planning to build and maybe sell in around 10 years. Hopefully there will be a significant capital gain in that time. A company structure wouldn't have access to the 50% capital gain discount available to individuals.
thats not correct, you have to be registered for GST if you collect it!!!
you cant go to coles and say Im paying 1/11th less because im not GST registered!! well ive never tried to...
Isn't that what I said?
If you collect gst and the ato expects you to pay them the gst, then you have to be registered for gst.
I don't think this works for a development site that is bought with an old house. The site I want to develop has an old house, so there is no GST component in the land. There would only be a GST component in the units I build on the land. I think that throws out your 1/11 of profits formula.
oh, are when you say "pay gst"
are you talking about paying the person supplying you a service? or paying the ATO??? its confusing, but if you are refering to "paying teh ATO" then people refer to it as "collecting GST" off custoemrs
but I agree, its confuysing
I'm looking into this now, and it's complicated. PLEASE correct me if I'm wrong.
A lot depends on whether the entity that builds the units is registered for GST, and whether they are in the business of property development. Determining whether an entity is in the business of property development seems to be another discussion in itself, but say your company (which, say, usually does contract cleaning work) buys a property, sub-divides then sells, then they probably will NOT be up for GST because it's not the main enterprise of the company and they have just realised an asset. (Because of this, GST credits related to the property should not be claimed by the business.) CGT will be payable and I don't think a company gets the 50% discount for holding more than 12 months.
However the NEXT time they buy-develop-sell they are demonstrating a pattern and it may be considered an enterprise. In this case, GST is payable and CGT is not, but all profit from the sale will be considered income for the company and taxed accordingly.
Yes sorry. I am referring to collecting gst when you sell your property, and paying the ato the gst.
It'll be good if an actual accountant could weigh in and clarify here (unless you guys are accountants... which I'm certainly not...).
I will have to talk to a good accountant before building because if:
1. my investment partner and myself register for GST
2. claim back the GST on the build cost
3. hold the townhouses for 5 years
4. sell
That sounds wrong to me. We would have only registered for GST for the sole or dominant purpose of enabling us to obtain a tax benefit. My understanding is that this would be contrary to Part IVA of the Income Tax Assessment Act.
I guess we will have to roll the dice on this one because if for some reason we had to sell within 5 years, we would be up for GST
It's a minefield - CGT vs GST ..... investor vs developer ........ revenue vs capital account
Your accountant can help BUT a specialist may be the way to go if you want to get it super clarified and your exact situation either justified or created (in terms of future purchases).
These specialists can cost a lot but even spending a few thousand may pay itself back triple by getting it right.
Some more reading for today on the topic - not a lot of info but enough for you to then ask the right questions of your accountant http://www.wpsmith.com.au/wp-content/uploads/2011/11/Property-developer-or-investor.pdf
Your accountant can help BUT a specialist may be the way to go if you want to get it super clarified and your exact situation either justified or created (in terms of future purchases).
These specialists can cost a lot but even spending a few thousand may pay itself back triple by getting it right.
Some more reading for today on the topic - not a lot of info but enough for you to then ask the right questions of your accountant http://www.wpsmith.com.au/wp-content/uploads/2011/11/Property-developer-or-investor.pdf
I love the way that starts... "If you buy a property with the intention of making a profit on its resale...". Well I ain't buying property with the intention of making a loss on its resale.
To confuse matters further (why not?) "If you are not registered for GST the sale of a new rental property in less than 5 years will not force you to be registered providing of course you can prove that you built the property to rent not to profit from its resale."
source: page 4 of http://www.bantacs.com.au/booklets/How_Not_To_Be_A_Developer_Booklet.pdf
and to further clarify on page 5:
"Even though the sale of the house would be the first sale of a new residence and therefore subject to GST you are not registered for GST so you are not caught."
In this scenario you have to pay GST but do not have to be registered for GST.
http://www.13wentworthselbornechambers.com.au/barlinpdfs/partitioninglandaugust2010.pdf
my understanding is that the land needs to be held on bare trust which requires the trust to be set up before the initial purchase of the land. As far as I know, this won't work for land purchased by individuals. The trust deed sets out the post-partition configuration of the land. If you change your plans, this would be a problem (as far as I know). "This solution helps when the co-owners know of their future partitioning at the time the property is acquired; it obviously does not assist property developers or co-owners who first consider the option of partitioning after the property has been acquired."
No - you can't but you claim the full (gst inclusive) amount as your cost.
Can't do it. "If you have been claiming them because you intended to sell the property so will have to charge GST on the sale, then later change your mind or can't sell it. Then using it as a rental property will mean quite a large amount of GST has to be paid back."
In the above scenario, I would have to pay back the GST I claimed. That's ok, because I wasn't going to do it anyway.
http://www.bantacs.com.au/booklets/How_Not_To_Be_A_Developer_Booklet.pdf
