Hi all,
I am looking at buying a 750 sqm site and gaining planning to subdivide into 2.
I may just look to sell the second land vacant or build out and sell both.
Please can you advise the best tax effective structure to buy. Is there a way I can structure to reclaim the GST inputs on the build costs?
Also, if I don’t build but just sell 50% of the lot is there any tax traps I should be aware of? That is,potential GST being paid on the sale land etc?
This is something you would need specific legal advice on. It could be individual, company or trustee depending on the circumstances.
Ownership entity won’t change the GST outcome either. Certainly GST can apply to the sale of vacant land, especially if you subdivide and sell as you will be conducting an enterprise. Have a look into the margin scheme to reduce any GST
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
can a propco/opco structure be setup in australia similar to the uk to be able to deduct?
So it makes no difference if buying in personal name or trust?
I don’t know anything about the UK
There is no GST difference between ownership entities – in this situation, but there are a lot of other tax and non tax differences.
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
what is the best structure for buying a property to subdivide then sell half the land at back and keep the front property?
It could be anything depending on the circumstances. It will depend on a lot of thing – ability to claim the main residence exemption, land tax, intention with the front property, stamp duty laws, asset protection, estate planning etc etc
Once you determine which legal owner then you have to work out how to structure the structure. If it a company acting as trustee of a discretionary trust, then how to you fund the deposit, how about the remainder, who should be shareholder, director, terms of the trust, should the trustee be excluded as a beneficiary, should there be different capital and income beneficiaires, should default beneficiaries be included, if so what about the asset protecton issues etc
You need specific legal and tax advice.
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
If you’re buying with the intention to subdivide and sell (whether land only or house + land), the ATO will generally view this as an enterprise, not a passive investment. That means GST can apply—but it also opens the door to claiming GST credits on development and build costs, provided you’re properly registered for GST and the structure is set up correctly from the start.
On structure, many developers use a company or trust (often with a corporate trustee) to manage risk and tax outcomes, but the “best” setup really depends on your broader situation (income, other assets, long-term plans). The key is that the entity purchasing the land and undertaking the development must be GST-registered to claim input credits.
If you:
Build and sell → Sales are typically taxable supplies, so GST applies, but you can usually claim GST on construction costs. The margin scheme may also be relevant to reduce GST payable.
Subdivide and sell vacant land → This can still trigger GST if the activity is considered a business/enterprise (which it often is, even for small projects). This is a common “tax trap” people underestimate.
A few things to watch out for:Buying property without GST in the purchase price can limit your ability to claim credits later
Incorrect structuring may mean no GST recovery on build costs
Selling without considering GST can lead to unexpected liabilities or reduced profit margins
Income may be treated as ordinary income (not capital gains) if it’s a development activity
Also worth noting GST calculations (especially with the margin scheme or apportionment) can get tricky quickly. Using something like GST Calculator Australia can help sanity-check numbers, but you’ll still want proper advice for structuring and compliance.
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