GST when selling

3) build to rent but sell in less than 5 years - you would not claim back any GST during construction and would 'charge' GST on sale (don't do this!!!)

I dont agree with that proposition. Firstly if the intention was to retain the property long term and circumstances meant you were forced to sell wouldnt suddenly turn it from being a capital asset and excluded from the gst turnover into a trading asset or profit from an isolated transaction.

Even if it did mean gst on sale you could claim back the gst you paid during the construction phase by making an adjustment provided it was within the relevant time period.
What happens if you are outside the relevant time period?
 
Did I mention this is not DIY? Always get specialist advice. It's way too complicated to figure out yourself.

In the above example, you may be able to make an adjustment if you are inside the relevant period and if you are registered for GST. However, if you were not registered and went to the ATO, registered then retrospectively claimed back GST, I'm not sure that is ok. But as I said, get advice. It's worth it!
 
Sorry to hijack the thread... but am I correct to say that GST on development isnt that bad afterall ?

From what I gather, GST is 1/11 of the profit you generated on the property, not the actual selling price, so the amount you pay is really a factor of how profitable your development is.

If land cost comes to around 150k each unit, and building cost is 150k and you sell for 400k for 100k profit.. you are really only paying ~10k in GST

Further, you can also claim GST credits for the construction cost so assuming there was gst paid for everything in the construction phase, then you can claim back around ~15k ?
 
Sorry to hijack the thread... but am I correct to say that GST on development isnt that bad afterall ?

From what I gather, GST is 1/11 of the profit you generated on the property, not the actual selling price, so the amount you pay is really a factor of how profitable your development is.

If land cost comes to around 150k each unit, and building cost is 150k and you sell for 400k for 100k profit.. you are really only paying ~10k in GST

Further, you can also claim GST credits for the construction cost so assuming there was gst paid for everything in the construction phase, then you can claim back around ~15k ?
I have seen the theory on here before that GST is only a tax on "profit" but that is not correct. It all depends on the circumstances of your development: whether the land has a GST component, whether the entity is registered for GST, whether the margin scheme is available to the seller etc... it's complicated!

Assuming the sale is subject to GST and the margin scheme is not available, the GST component of the sale is 1/11th of the sale price. Whether this amount is offset by GST claimed during construction also depends on the circumstances of the development and the GST status of the entity developing the property.
 
Maybe you 'ought' to be registered for GST.
This is the whole reason why people must get proper advice even before they put in an offer on the land. What is the best entity to buy the land: individual? trust? company? Should the entity be registered for GST? Which entity is going to build? Should that entity be registered for GST? Can you claim GST costs back as you construct? How much GST do you pay on sale? Can you use the margin scheme when selling? If yes, should you? Should you hold for a year? Should you hold for five year? And as above, what if you built to rent and then have to sell? What can be put in place in case that happens?

There is no right and wrong answer to any of the above questions. The answers depend on your purpose and goals. This is the time when you do not try to DIY. This is the time you pay a professional to give you solid advice. Get it wrong and it could cost hundreds of thousands of dollars. I have seen it done wrong. It's not pretty.
 
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