GST and Property Sales
June 2000 (revised January 2003)
Prospective sellers and buyers of real estate ought not panic on account of the GST laws. A bigger problem for sellers might be the impact of rising interest rates or falling share prices on business and investment cashflows and spin-off impacts on market confidence.
Here is a quick summary of the GST position on property sales:
- Care must be taken to include appropriate wording in the contract of sale to ensure the vendor does not lose one-eleventh of its price in GST to the ATO without being recouped from the purchaser.
- GST is not chargeable on the price of private sales of existing residential housing other than new (first sale) residences. GST will still apply to the agent’s commission and other selling expenses for all residential sales.
- The sale price of commercial property is subject to GST but a GST-registered purchaser may claim the GST back as an input tax credit. The GST presents a temporary cashflow issue.
- Many a tenanted commercial property purchase could qualify for “GST-free” status as “sale of a business (of leasing investments) as a going concern” if special wording is inserted in the contract and both parties are GST-registered.
- Even if a purchaser is not GST-registered and GST is payable on the price (either on purchase of commercial property or a “new” residential property), an election to use the “margin scheme” can result in little or no GST being payable especially in the near future.
- Buyers of an “old” house from an owner-builder may still be subject to GST where first sale is post 1/7/00, but the margin scheme may assist.
- Although GST is not payable on stamp duty, there will be a windfall for the State Revenue Office as stamp duty is to be charged on the total consideration inclusive of the GST. This is an extra expense for purchasers.
- First home-buyers may qualify for Federal government financial assistance to compensate for the GST impact on increased costs for new homes acquired after 1 July 2000.
For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.
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