Understanding Property Development Tax in Australia – GST

July 15 2014
Men in suits looking at reports

Understanding Property Development Tax in Australia.

Building a residential property development in Australia, be it a duplex, triplex, small unit development or large or multiple-site property development project, there will no doubt be property development tax implications for you and your partner.

Many Australian’s turn to property development as a way to engage in defensive tax strategies and to build capital and rental income over time. However, come tax time, the ATO is very keen to hear about your activities in property development. There are a number of deductions you need to consider. In the context of property development there are several GST implications that you, your partner and tax accountant will need to consider.

Below are some of the various tax implications and potential deductions listed by the Australian Taxation Office online, in regards to residential property development in Australia.

Building and construction – residential premises in Australia, according to the ATO.

Property Development and Tax Time - GST implications

Property Development and Tax Time – GST implications

Goods and services tax (GST)
Residential premises include houses, units and flats that are occupied or can be occupied as residences. It does not include vacant land.

GST applies to new residential premises but not existing residential premises. Residential premises are new when any of the following apply:

  • they have not been sold as residential premises before
  • they have been created through substantial renovations
  • new buildings replace demolished buildings on the same land.

Building new residential premises

If you build new residential premises for sale, property developers can claim GST credits for the construction and any purchases you make related to the sale of the premises (subject to the normal rules on GST credits)
you are liable for GST on the sale.

Residential premises are no longer new residential premises if they have been continuously rented for five years after first becoming new residential premises. In this case, they are input taxed. If GST credits were claimed at the outset, a change of creditable purpose may apply.

If you rent the new premises while you are planning to sell them, you will need to adjust part of the GST credits you claimed.
You must show you intend to sell the premises. Actively marketing the premises for sale is one way of showing this.

See more from ATO – Building and Construction – Residential Premises and Tax.

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