GST - Who ,what, when, where, why...

[Ross Sondergeld]

Hello Everybody,


(i.e. ATTENTION... Dale !!!)



OK... here's the example... But please note... I've used round numbers that are close to actual numbers... and I've excluded buying, selling and holding costs... So here goes...

Example...

Land bought for $ 300,000 (bought on margin scheme)
House built for $ 300,000 (assume $30,000 of GST in supply)
Cost $ 600,000

Sells for....... $ 800,000

Profit ------------- $ 200,000


Ok.... so what does the investor make $$$ after GST ????

 

[DaleGG]

Originally posted by Ross Sondergeld
OK... here's the example... But please note... I've used round numbers that are close to actual numbers... and I've excluded buying, selling and holding costs... So here goes...

Example...

Land bought for $ 300,000 (bought on margin scheme)
House built for $ 300,000 (assume $30,000 of GST in supply)
Cost $ 600,000

Sells for....... $ 800,000

Profit ------------- $ 200,000


Ok.... so what does the investor make $$$ after GST ????

The investor has made a profit of $157,300 using your example. This is based on 1/11th of the sale price being GST on the sale ($72,700)

So, profit = $200,000
Less GST in sale $72,700
Plus, GST included within construction $30,000

After GST profit = $157,300

Cheers

Dale

 

[Macca]

Being real estate, couldn't you sell this using the margin scheme?

Cost would be 600K sale price 800k Profit of 200k/11 = $18181 GST.
Any GST on land should be paid by developer, any GST on building costs paid by builder.

Macca

 

[Mick A]

Just to set the record straight. If you purchase land that the vendor has chosen to use the Margin Scheme, you may also use the Margin Scheme when you sell the land. The GST calculation would be:

Selling Price: $800,000.00
Less land purchase (under Margin Scheme) $300,000.00
Taxable Supply $500,000.00
GST Payable 1/11 of the taxable supply $ 45454.54


Profit:
Selling Price $800,000.00
Less GST owing -$45,454.54
Construction Costs (assume GST Inclusive) -$300,000.00
Less land cost -$300,000.00
Add input tax credits (1/11 of const cost) $ 27272.72
Profit. $181818.18

The Margin Scheme is not widely understood, the only time you would consider not using the Margin Scheme is if the purchaser could claim input tax credits.

Mick A.

 

[Macca]

Mick,
If the land had been purchased from a private owner who has had the land for a couple of years or more, simply as an investment what is the situation?
He or she would not be using any GST scheme, it would simply be a sale. Do we then calculate the GST in the same way as with land purchased from a developer?

Macca

 

[Mick A]

GST - Who,what,when,where,why...

Macca

You can chose to apply the Margin Scheme provided that the supply to you was not a taxable supply. If you acquired the land from an entity (or individual) who is not registered to charge GST, then the supply to you is not a taxable supply, therefore you have not been charged GST so there are no input tax credits to claim. It is your call to sell the land as either a taxable supply or use the Margin Scheme.

Regards

Mick A.

 

[Macca]

Thanks for that Mick

Macca