GST - Build 2 townhouses (Sell 1/Keep1)

[toony]

I wish to develop a site i have an old house on. I am an individual and not registered for GST.

My intentions are;
1. Build 2 side by side townhouses
2. Use a builder to Build (Pay GST)
3. Keep one unit
4. Sell the other unit.

Do I have to pay GST, to the ATO, on the sale of the townhouse? If so, is it best to register for GST then?

 

[Aaron_C]

This is a tricky question but it boils down to whether you ought to be registered for GST. If you do this kind of thing many times then the ATO may deem to you be running a 'business' and therefore need to register for GST.

 

[MTR]

I wish to develop a site i have an old house on. I am an individual and not registered for GST.

My intentions are;
1. Build 2 side by side townhouses
2. Use a builder to Build (Pay GST)
3. Keep one unit
4. Sell the other unit.

Do I have to pay GST, to the ATO, on the sale of the townhouse? If so, is it best to register for GST then?

I will be in similar situation shortly and am going to register as I plan to continue developing, if it were a one off I would not bother too much.

My concern is that if you do not register GST and continue developing, ATO will look at previous developments and hit you with penalties, this is what I have been told, but not an expert in this area.

Also, I absolutely love the link this little holiday spot, never been there, looks great. OK, perhaps your on next time in Vic

 

[coastymike]

New residential premises not leased for 5 yrs means you will be required to be registered for gst and remit gst on sale.

doesnt matter whether you have done one or fifty. Question is whether it is in the course of furtherance of an enterprise and the ato says yes.

 

[GreenMedallion]

Excuse my probably basic question, although why may GST be payable on the sale price? Is it because private development is regarded as providing a service?

 

[Ausprop]

Excuse my probably basic question, although why may GST be payable on the sale price? Is it because private development is regarded as providing a service?

a 'good', being a new residential premise

 

[MRO]

There are many factors the ATO consider and I think they have released a document stating a numerous list of these. I haven't got time to look but I am sure it exists. Things like: your profession, other business activities you conduct, your history, etc.

There is no conclusive answer. It is really quite subjective and you just need to work through to a logical conclusion and hope the ATO see it the same way.

 

[Tigerboy]

I wish to develop a site i have an old house on. I am an individual and not registered for GST.

My intentions are;
1. Build 2 side by side townhouses
2. Use a builder to Build (Pay GST)
3. Keep one unit
4. Sell the other unit.

Do I have to pay GST, to the ATO, on the sale of the townhouse? If so, is it best to register for GST then?

Tony if you do what you just wrote, you will need to pay GST. You will also need to determine whether you will use the margin scheme or not.

In addition to GST you may also be liable for capital gains tax/income tax on any profit.

A really simple thing you could do is, build two, move into one and then sell that one. Then move into the second one. This would then make the first sale tax and GST free.

(I think you owe me a coffee )

Huss Kaygusuz

 

[MRO]

A really simple thing you could do is, build two, move into one and then sell that one. Then move into the second one. This would then make the first sale tax and GST free.

I am not sure this is totally correct.

 

[coastymike]

I agree with miro. If you move into the property and havent leased it continually for 5 years how is it going to be gst free ? It will be the sale of new residential premises. Be best to read up about new residential.premises.and the 5 year rule.

also once you move in or lease it out then you will be subject.to.a balancing.adjustment and have to pay back any gst you have claimed.

 

[toony]

I know it would be good to move into at least one of them. However my wife and kids are not prepared to move from our PPOR.

I have two questions;

1. If the sale of Townhouse 1 = $770k. Does $70k go on GST or is it only the building portion ie. lets say (Land = $200k and build costs $400k.), so the GST is $40k.

2. So if i am an IT contractor and do this on the side, why cant i pay the GST to the builder (i am input taxed like a landlord) and pay NO GST? Is that possible? Any profit is either Capital Gains or Income?

 

[Ausprop]

I wouldn't get distracted about what you do and don't do on the side - this is pretty plainly an enterprise and GST applies. the GST to the builder is claimable. when you sell you could apply the margin scheme which in simple terms means you deduct the land off the sale and divide it by 11 to work out a rough idea of gst liability

 

[Melbournian]

I know it would be good to move into at least one of them. However my wife and kids are not prepared to move from our PPOR.

I have two questions;

1. If the sale of Townhouse 1 = $770k. Does $70k go on GST or is it only the building portion ie. lets say (Land = $200k and build costs $400k.), so the GST is $40k.

2. So if i am an IT contractor and do this on the side, why cant i pay the GST to the builder (i am input taxed like a landlord) and pay NO GST? Is that possible? Any profit is either Capital Gains or Income?

why don't you ask for a written ruling from the ATO before doing anything.

explain your situation etc. if you purchase land - and possibly considering to do a sub division etc, do you have to pay GST etc?

 

[Tigerboy]

If you live in the house first as a ppor then the five year rule doesn't apply. If you rent it then you need to consider five years.

This is an enterprise, however not if it is your ppor.