Main Points Considered A New Zealand Citizen living in Australia, do they qualify for the First Home Owners Grant (FHOG) Also, can they qualify for the First Home Owners Stamp Duty Concessions What if they rent out the spare bedroom to help pay the mortgage? Scenario...
GST for those in the business of renovating to sell houses
A client was wondering how to treat the GST, on a typical example –
- Buys a house from a person not registered for GST for $300,000
- Does the renovations at the cost of $55,000
- Claims the $5,000 GST, then sells the property for $410,000
Question – Is GST Payable on the full selling price? Or, is there some kind of allowance for the fact the original purchase price was GST Free?
Issues to consider –
1 As a general rule residential homes are (GST Free), even if the sale is made in the ordinary course of business. The only exception is for commercial residential premises (hotel, motel, bed & breakfast, hostels) or new residential homes.
2 For an existing home to be treated as a new residential home it must have substantial renovations – the ATO provides detailed guidance on what it considers substantial renovations at GSTR 2003/3
3 If substantially renovated then the house will be treated as a new residential premise and GST will apply on the full sale price unless the margin scheme is applied to reduce the GST (margin being $410,000-300,000 = $110,000/11 =$10,000).
4 If not substantially renovated the house is (GST Free) and the business would not be able to claim GST on the renovations or charge GST on the Sale.
Umbrella Accountants – Property Accountants Brisbane
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