All Topics / The Treasure Chest / GST and new residential property

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  • Profile photo of andyjandyj
    Join Date: 2003
    Post Count: 1

    Hello all,

    Could someone help me understand the following please..

    I’m a GST registered sole trader(no separation between me and my business)and planning to buy a OTP unit for investment at a price 330k.
    This amount would include gst of 30k. Can I claim back this large gst amount to offset the gst I pay regularly from my business?

    Valuation: Does the payment of GST on a new property effectively mean I am paying 10% over bank valuation??

    Stamp duty: Is stamp duty calculated on the GST inclusive price. Must I pay tax on tax??

    Bit confused, thanks in advance.
    I know the above would not apply to commercial prop because I would charge gst in rent.

    Profile photo of davidfemiadavidfemia
    Join Date: 2003
    Post Count: 89

    Hello Andy,

    I guess the first thing you need to do is differentiate yourself from your business. Even though you may be a sole trader, you are deemed as two seperate entities.

    If you are buying the house under your business, then GST is claimable. However, if you are buying it under your name as an individual, then its not.

    When it comes time to settle the property, the bank will do a valuation on your home. This is simply so they know they can recoup their loan, should you not be able to pay it. The property may be valued more than the loan, however, the bank will only be concerned if it is below.

    Stamp duty is paid on the purchase price. Unfortunately for new homes, it is much like paying tax on tax.

    David Femia

    Femia Property Group
    Property Investment Consultants

    Profile photo of ldp43.ldp43.
    Join Date: 2003
    Post Count: 10


    If the unit is for residential accommodation, then it is input taxed, and you will not be able to claim back any GST associated with the purchase or future running costs. It would be ideal to keep it completely separate from any other GST registered business structure that you may have.

    As far as valuation is concerned, a buyer will only pay what a buyer believes a property is worth. If a new property owned by a GST registered entity was next to an identical property which was not new, and they were both for sale, they effectively are worth the same. Fred next door is not going to sell his house for 10% less because he is not GST registered.


    Profile photo of andyjandyj
    Join Date: 2003
    Post Count: 1

    Thanks guys for your replies.

    My business is me – it even has my name!
    I claim tax and gst on every cost involved in earning an income. Would this not include residential investment property income?

    Still confused.

    If I buy a new resi property for 330k inc GST will the BANK value it at 300k or 330k?

    Thanks again.

    Profile photo of truebluetrueblue
    Join Date: 2003
    Post Count: 142

    As you are the ultimate consumer of the product, you cannot claim the GST.

    Even if you can claim the GST, you cannot claim it in one lump sum as it has to be spread over the period of the loan as in a hire purchase arrangement.

    However it would be interesting to hear what your accountant has to say.

    Profile photo of scratchmescratchme
    Join Date: 2002
    Post Count: 56

    Hi andyj,

    Let me try and answer this one:


    If I buy a new resi property for 330k inc GST will the BANK value it at 300k or 330k?

    NEITHER!!!! The bank will send a valuer around and whatever figure he comes up with will be the value of the property. It can be anywhere between 250K and 380K. HOWEVER your bank will use the lesser of the contract price (which is 330K) or the valuation.

    So if the valuation comes in at 350K the bank will go off the purchase price, which is 330K.

    If the valuation comes in at 280K then they will use that.

    I guess what you want to know is whether 330K or 300K is the correct price. The correct price for YOU as a consumer is 330K (You dodn’t need to worry about the GST content.)

    Let me try and explain. As an educated consumer you will only buy a property if it is a good deal. So if 330K is a good deal then buy it.
    Think of it this way, the developer can ONLY sell his property for the market value (NOT the market value + GST because no one will buy it…). This means that the market value already includes GST (and this is only for new developments). So really it is the developer that is loosing the money NOT YOU!!!

    Hope this helps,


    Australian Property Software




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