How Might This Be Taxed?

[beech]

As builder ive been wondering how this scenario might pan out.

Say a customer wanted me to build them a brand new home but had no deposit.
I suppose they could get 100% finance(maybe) NO/LOW DOC,but this is obviously dearer than a mainstream lender.

Say the costs involved meant that they wanted to go with a mainstream lender at 80% and payed me back monthly over X amount of years the DEPOSIT as an income stream to me

An Example of some figures.

lets say block of land 90k
to build say 150k(contract for construction only)not H&Land
value at end 300k

So the client spends 240k and the extra 60k(my profit)covers their 20%deposit to be paid back to me over x amount of years.

As a builder in business what would be my tax position re this particular situation?

Income tax yearly on the monthly repayments to me but not sure regarding the GST issue in this situation.

Look forward to your thoughts.

 

[DaleGG]

HI

If you elect to use the STS (Simplified Tax System) and a "Cash" accounting methodology then you will be taxed in the year in which the money is received and not when it is invoiced.

GST should also be declared when teh funds arrive in.

Dale

 

[beech]

Hi Dale,

not sure what you mean by the GST should also be declared when the funds arrive?

What amount of GST is payable on the above situation if possible?

 

[DaleGG]

Hi

At vace value, and ignoring the margin scheme, GST collected will be 1/11th of each amount received.

Of course, you can also claim back the GSt that you pay out in the development process.

Dale

Hi Dale,

not sure what you mean by the GST should also be declared when the funds arrive?

What amount of GST is payable on the above situation if possible?

 

[beech]

So if i only invoice customer for the total 150k build (GST receivable) and claim back the (GST paid)they pretty much cancel each other out.Is this right?

Would i have to pay GST on the income at all because this extra 60k profit(paid back yearly) is still part of the initial contract isnt it?

Thanks again Dale.



Has anyone else got any thoughts on why this way of building for a customer might not work.

What or how would the bank look at this type of situation,the customer not having the initial deposit but paying off their deposit over time?

Look forward to some replys.