GST on Land (plus GST if any)

[kept]

Hi All

About to buy some land and the S&P has plus GST if any.
We are buying it as individuals from a developer.

On trademe etc it has only been advertised at a particular amount which if there is GST was the GST exclusive price.

So wanting to know under what circumstances we would have to pay an increased amount, i.e. GST on top of the advertised price.

Your help is much appreciated.

[Beano]

Hi All

About to buy some land and the S&P has plus GST if any.
We are buying it as individuals from a developer.

On trademe etc it has only been advertised at a particular amount which if there is GST was the GST exclusive price.

So wanting to know under what circumstances we would have to pay an increased amount, i.e. GST on top of the advertised price.

Your help is much appreciated.

If you are GST registered then you do not need to pay the GST.
Only the end user pays GST

[kept]

Thanks Beano for the prompt reply.
So if I'm not GST registered, we pay the higher GST inclusive amount, and I believe if operating as rental accommodation supplier, this is not normally a GST registered activity.
Whereas if we were set up to develop/build the property and then sell it, we could be GST registered?
Allowing us to claim back GST on the build, but have to pay GST on sale.

Sort of misleading that the advertising does not have to mention (plus GST if any) whereas a seller of goods if not displayed with a note stating GST exclusive then it's GST inclusive as otherwise it's misleading.

[Rosco]

Hi Kept,

If you are buying from a developer, they have to pay GST on the sale.

So if they advertised at $200,000, and then the S & P is $200,000 plus GST, that would be quite normal and I don't think it is misleading (my opinion).

If $200,000 plus GST, then you would pay $230,000 if using for personal house or long term residential rental.


If the contract and price doesn't work for, either don't do it or try to knock the developer down until it does work for you.

Ross

[kept]

Appreciate your input Rosco.
I guess not misleading if you know the industry. The two previous land purchases we have done, one was from a developer and was GST inclusive and one from private non registered seller which was also GST inclusive.

So if we pay the full amount including the GST now, build the house (not claiming GST on the build costs) but then decide to sell it rather than rent it. What would happen?

[kept]

So thinking this is more a trade opportunity based on the feedback from my other thread.

Slightly off topic - What's the best structure to undertake this as a development/trade/sale property? Are these the main options?

1. Buy and build under non GST registered entity (pay plus GST for the land), not claim GST on land or build, not pay GST on sale (S&P agreement will be written as what)? Pay tax on profit.

2. Buy and build as GST registered entity (land price gets zero rated so reduced price for land?), claim GST on build costs (not land), sell and pay GST on the full sale amount (land + build costs), pay tax on remaining profit?

Is that correct or completely wrong?

[Rosco]

There is unlikely to be an option. It will either fall into be required to GST registered or not.

I would suggest you get some expert advice on GST registration and structure as both are reasonably complicated.

Ross

[kept]

Surely there is an option?

If we stick to the original plan (to buy and build as long term investment) we would pay GST on the land and GST on the build costs, not claim any GST on the land or build, and then in the future should we have to sell, no GST would be payable? (making sure to put plus GST if any on the S&P in case the buyer is GST registered and able to use it commercially/as a taxable activity)
No?

[Rosco]

If your income will be under $60,000 in the next 12 month period, then you have some options with GST.

Otherwise you either are or your not doing something. And based on that, you either will or won't have to be GST registered.

[kept]

Thanks Rosco