Did You Know That If You Sell a New Residential Property You May Have To Register For GST?
Let me clarify the scenario:
Mr Gump is not a business owner but an employee. He purchases a piece of land and then commissions a developer to build one or more residences on it, which he then immediately sells with the intention of making a profit. You might think that this is a private transaction and therefore has nothing to do with GST, but BE CAUTIOUS.
Surprise Surprise! Regulation defines Mr Gump as operating a business and if the sale value is greater than $75 000, Mr Gump would have to register for an ABN and GST.
He would have to charge GST on the sale, which the purchaser would have to pay over to the ATO.
Mr Gump will have to notify the purchaser in writing before the settlement takes place, about how much GST the buyer is required to pay over. This amount would be credited on the activity statement completed by Mr Gump.
There is a special scheme called the “Margin Scheme” which might be applicable to the sale transaction, which will reduce the amount of GST payable. The way Mr Gump originally bought the land and the timing of the acquisition will be relevant in determining the eligibility of this scheme.
As you can see, when it comes to GST and Income tax, the situation is never straight forward, so should you need assistance with any similar transactions, make contact with us by emailing: email@example.com or ph 08 6263 4466
Life [need not be] like a box of chocolates, you [can] know what you’re gonna get. (Forrest Gump)