Usually, you don’t have to pay GST on the sale of your private house. But, if you have a business buying and selling houses, then you need to pay GST for every property that you sell. Not only GST, but you have to consider implications of stamp duty, land tax, and income tax as well.
For all property investors, the ATO offers a GST margin scheme property that allows you to calculate GST payable on the sale of property in an alternative manner. Buyers and sellers of property are required to register for GST and have an Australian Business Number (ABN).
When do you pay GST?
GST is payable at the time of selling property. Even if it is a one-off sale, you have the liability to pay GST on the sale of a property. GST is charged on new house property. New house property is one which has not been sold as residential premises before. This also includes a house that has been substantially renovated or built after demolishing the previous one.
The land is not considered as a house property and attracts GST on sale and purchase. Usually, GST on the purchase of property is 10% of the price, but if you are eligible for the GST margin scheme, you could calculate the GST in an alternative manner.
What is the GST margin scheme and when is it payable?
Under the GST margin scheme property, you pay GST on the margin between your selling price and the original purchase price. The GST under this scheme is one-eleventh of the margin, which means that you pay much lesser GST in comparison with the GST without the GST margin scheme.
According to the Australian Tax Office, the GST margin scheme is not an automatic scheme. You must be eligible for the scheme and you must have applied for the scheme.
When are you eligible to use GST margin scheme?
You are eligible to use GST margin scheme when you fulfill the conditions required for the same:
- When the property was initially purchased, and
- How GST was applied at the time of the original purchase.
- If your answers to these two queries fulfill the conditions as regulated by the authorities, you can use the GST margin scheme.
Conditions when you cannot use GST margin scheme
You are not eligible to use the GST margin scheme:
- When the property in question was purchased and GST was paid without using the margin scheme.
- When you have got the property in inheritance and the deceased individual had purchased the property without meeting the margin scheme eligibility criteria
- When you have received the property through a joint venture and the operator of the joint venture had obtained the property without meeting the margin scheme criteria.
- When you received the property from a GST- free supply of a going concern.
How Mosaic Tax Legal can help you with the GST margin scheme?
Professionals at Mosaic Tax Legal are highly professional and qualified in all fields of taxation. They know ways in which you can get benefit from GST margin scheme property. They will consult you for preparing documents through which you can easily get a GST margin scheme and reduce your tax liability on the property sales.