GST on Development

[Nominees]

If we buy and then sell land, we pay GST on the margin. (if we opt for the margin scheme.)

If we buy a vacant block then build on it then sell we pay GST on the margin.

But what happens if we buy a block that already has a house on it, knock it down and build a new one then sell it. Do we have to pay GST?

I would say yes, since major renovations are subject to GST and this would be major! ... But is their a loophole....???

If I build more than one property, I read somewhere that you can minimise CGT and GST by having the right structure and keeping one or two properties after completion. Any ideas on what this would be?

Thanks,

Nom

 

[JoannaK]

Originally posted by Nominees

But what happens if we buy a block that already has a house on it, knock it down and build a new one then sell it. Do we have to pay GST?

I would say yes, since major renovations are subject to GST and this would be major! ... But is their a loophole....???

If I build more than one property, I read somewhere that you can minimise CGT and GST by having the right structure and keeping one or two properties after completion. Any ideas on what this would be?

It's a minefield!

I think that if you are registered for GST then Yes, you'd be required to account for GST if you've built a new house then sold it. You'd also be claiming the GST you'd paid throughout the project on your BAS each quarter or month.

If you're in the business of development and you build more than one property and hold one or two of them you will be required to do GST adjustments on your BAS once everything is finished, so you'll still end up paying GST as you will have effectively sold the properties to yourself (the properties are treated as stock or inventory). You'll also be required to account for CGT/Profit, again, because you've effectively sold the properties to yourself.

Perhaps one of the resident accoutants can clarify further, but this is the advice I have been given.