GST & Residential Property Developments

GST & Residential Property Developments


Hi, I’m Bec Mackie. I’d like to have a quick chat to you, about GST and how it applies to residential property developments. We’re just going to look at small scale developments, not larger
scale developments. So, I’m just talking about, you know, one, two, three units,
something like that. Although the same principles apply, The intentions change
more regularly with these smaller developments and that’s what I wanted to focus on today. And intention is a big part of what I want to talk about as well. Because, when your intention for these new properties changes so does
your responsibility for GST. Some people aren’t always aware of that, and can get a bit of a
shock when they realize that the GST they claimed needs to now be paid back to the
ATO or they have to pay more GST to the ATO than what
they originally realized. Sometimes this can even result in your property sales making a loss, which is not ideal and in those cases, you may well have been better off renting the property out for a few years. When it comes to the intention, as I mentioned before,
it’s really important to keep a record of when
your intention does change. So, say, for example,
you’ve got a block of land, you’re going to build three units on it and you want to sell them. That’s great. You know that GST is going to apply. So, that’s not an issue. Then, when you go to
put them on the market you find that as is current at the moment, the market’s dropped a
little bit and you’re really not going to get your money back. So, you decide to rent them
out for a little while. At that time your entitlement
to have claimed all the GST on the build changes and you’re no longer entitled to it. So, it involves some quite
complex calculations where we have to adjust the
GST and pay back some of what you’ve claimed to the ATO. Now, if the opposite was a carry and you decided to, you built the properties to rent them out then you
got a really good offer and decided to sell them off. Then, the opposite would
apply and you would now be able to claim the GST on the build that you hadn’t been
able to claim previously because you were going to keep
the property and rent it out. So, as you can imagine
this is quite complex. It’s worthwhile doing a bit of research and having a chat to your accountant to make sure that you
understand what’s going to happen when and if your
intentions does change. Thanks, have a great day.

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