Accountant Allied Health Annuity Apps Asic Asset Finance Asset Planning Asset Protection Asset Protection Strategies Assets and Risks Ato Auction Audit Insurance Australian House Market Report Baby Bonus Binding Death Benefit Nominations Binding Financial Agreement Binding Financial Agreements Body Corporate Bonds Borrowing Brexit Budget Budgeting Business Business Tax Deduction Capital Gains Tax Capital Gains Tax: Will Capital Protection Cgt Checklists Commercial Loans Commercial Property Concessional Superannuation Contribution Corporate Trustee Darren Foster Debt Debtors Deceased Estate Depreciation Economic Update Economy Estate Planning Executor Fbt Federal Budget Federal Election Finance Finances Financial Plan Franking Credits Gst Holiday House Hybrid Unit Trust Individual Ownership Insurance Insurance In Super Interest Rates Investment Investment Loan Investment Loans Investment Property Investments Joint Ownership Ken Burk Land Tax Lending Life Insurance Linda Hamilton Loan Repayments Loans Lvr Margin Loans Margin Scheme Market Update Medical Expenses Mortgage Mortgage Broker Mortgage Broking Mygov Negative Gearing Offset Account Paris Financial Pat Mannix Payg Variation Pension Practice Valuations Private Wealth Property Property Development Rebecca Mackie Redraw Facility Refinance Renovating Research & Development Retirement Retirement Planning Retirement Savings Salary Sacrifice Scams Self Managed Superannuation Self Managed Superannuation Fund Seminar Shares Small Business Smsf Smsf Borrowing Smsf Property Smsf Self Managed Superannuation Fund Steve Golding Steve Wildes Strategic Business Structuring Structures Subdividing Property Succession Plan Superannuation Superannuation Fund Tanya Hofbauer Tax Tax Benefits for Super Tax Concession Tax Deduction Tax Investment Property Tax Offset Tax Planning Tax Savings Tax-Free Tenants in Common Tessa Testamentary Trusts Transition to Retirement Trust Trusts Ttr Will

Do I Have To Pay GST On My Residential Property Development?

Do I Have To Pay GST On My Residential Property Development?

It’s easy to become confused about GST and how it applies to residential property developments.

Below, I’m discussing small scale developments, rather than larger scale. This means one, two, three units, or similar.

A change of intention means change of responsibility

Although the same principles apply, the intentions change more regularly with smaller developments.

When your intention for these new properties changes so does your responsibility for GST.

Some people aren’t always aware of this, and they are shocked when they realise 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 realised.

Sometimes this scenario can result in your property sales making a loss, in which case you may have been better off renting the property out for a few years.

A typical scenario

You’ve got a block of land which you’re going to build three units on and then sell them.

That’s great. You know that GST is going to apply. So, that’s not an issue.

However, when you go to put them on the market, you find that the market has dropped and you’re not going to get your money back.

So, you decide to rent them out for a little while.

At that moment when your intention changes, your entitlement to have claimed all the GST on the build changes too. 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 occurred and you were building with the intention of renting. Then, instead, you decide to sell, you would now be able to claim the GST on the build that you hadn’t been able to claim previously.

The first step…?

Property tax law, and in particular, GST on residential property developments, is complex.

It’s vital that you keep a record of your original intentions and also when they do change.

You’ll also find that speaking to your tax accountant will be very valuable for assisting you to make the best decisions that enable the best tax outcomes.