Hey guys, this question has prob been asked numerous times. But I need some advice on the below scenario:
Please see the below facts:
– Property was purchased in Dec 2010
– Client lived in the property as his main residence for six months.
– During this time he applied and was DA approved to construct a duplex. The intention was to build one which was his main residence and lease the other out as a long term rental.
– As soon as he moved out, he rented the property.
– In August 2012, he advised the tenants he needed the property back so he could construct the duplex.
– The duplex was recently completed and constructed as an owner builder.
– The client works full time 9 to 5 job and had the duplex managed by a site manager
– Bearing in mind the client does not own or run a construction business and hence is not registered for GST.
Can you please assist with the following questions:
1. If the client received a good offer for the duplex which was intended to be his main residence, would he be liable for GST, CGT or taxed on this as ordinary income due to fact this is new residential property? Can we argue a mere realisation and therefore pay CGT? Would we still be liable for GST?
2. If he does have to register for GST, will this mean he will be liable for GST when he sell's the duplex which is leased within 5 years of construction?
3. if he does move in as originally intended and used one of the duplexes as his main residence and then sells within 3 months will he be exempt from CGT and GST? And due to the fact he is not registered for GST, he should be able to sell the other investment duplex without having to pay GST as it was leased and therefore input taxed?
Your feedback would be appreciated
Thanks
New residential property is subject to GST. New includes property constructed or substantially renovated in the past 5 years.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
3) even new property that is leased is still not except from gst Unless 5 years of continually leasing has occurred from the point in time when the dwelling was deemed habitable. ie when it was fully constructed. Also just not registering for gst doesn't mean he negates his liability for gst.
You whole argument to if gst is payable was if you person is either seen as a property investor or a developer. If this is the first time he has done a project like this. It might be seen as a realisation of cgt over paying gst. If this is the 2nd or 3rd time and he has done in in furtherance to running a enterprise type buisness. then most likely gst applicable.
But also, even if it was his first time. If his 'intention' was to then on sell the property after 3 months, 6 months 1 year then his intention would mean he acting as a developer/business owner and gst would be applicable. Although harder to prove what his intention was.
If developing a property under a company (to sell) do you have to pay CGT and income and gst ??
Jason957
Sutherland Shire Real Estate Agent - Jason Mikhail - 0402 640 630
Jason957 wrote:If developing a property under a company (to sell) do you have to pay CGT and income and gst ??Developers generally do not pay CGT just straight income tax. GST would still apply.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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