Do you have to pay GST on new dwelling if you use it as PPOR before selling?

[Land]

Hi all,

With the dual occ we are currently building, I know that we have to keep it as an IP for at least 5 years before selling if we want to get away with not paying GST.

However, if we move into it for like 3 months (prior to reaching the 5 years) and sell it, claiming it as PPOR to avoid paying CGT, do we also get away with not having to pay GST?

Land

 

[JoannaK]

Hi Land,

just a question, are you claiming the GST that you're paying during the construction phase?

About 18 months ago I had the pleasure of a random ATO Audit regarding this particular matter and I learned that If you are claiming the gst during construction, then I believe that YES, you will need to charge and remit GST when you sell. If you decide not to sell, then in the financial year 12 months after the property has first been rented, you will need to give back all the gst you've claimed during the building phase! You'll still have to charge the gst if you sell within the 5 years and your accountant will need to do a whole lot of adjustments to your BAS - it really is a total pain the bum!

I believe, either way, if you've claimed GST, you need to charge GST whether you've lived in it or rented it or not.

Naturally, seek the advice of your accountant as I am not an accountant.

 

[Land]

Hi Joanna,


No, we haven't claimed any GST during construction. I know that normally we would need to keep it for 5 years to not have to pay GST before we sell it, but was wondering if we moved into each one for 6 months, and claimed each one as our PPOR (one at a time of course), whether or not that meant we wouldn't have to pay GST when we sold....

Land

 

[Mry]

It has to do with your intention.

Here is my little flowchart on the GST and taxation treatment for property sales.

Its not very pretty.

What Joanna said is true. If you claim GST on the development phase, you are saying that you intend to sell.

If you don't claim GST, that is either (a) a mistake (b) you plan to use it as a place of residence (or for private purposes eg a stable) or (c) you plan to rent it out so there's no point. Note that it would be VERY difficult to argue that you built a duplex and did not intend to profit from the sale of at least one of them when you sell both so quickly.