It’s great to see the property market in South-East Queensland going in the right direction. With that comes an upswing in volume of transactions and GST consequences to consider.
GST and property has always been a touchy area and the Australian Taxation Office have remained active and vigilant in identifying problem transactions.
With the market now moving in the right direction we thought it a good time to set out the most common mistakes we see in the market by developers and professionals. So, here are 7 Common GST Mistakes on Property:
#1. CHARGING GST ON PRE-EXISTING RESIDENTIAL PREMISES.
For some reason this continues to happen almost 15 years after GST was introduced. If a developer sells pre-existing residential premises there will be no GST effect [they are input taxed supplies]. This is despite the fact that the developer is GST registered and selling to another GST registered developer. To be clear this only applies to pre-existing houses, units, apartments, etc … not land that may happen to be in a residential area.
#2. FORGETTING TO AGREE THE MARGIN SCHEME IN THE CONTRACT.
While most developers are aware that selling under the margin scheme can save GST on sale it is still often left out of the contract in error. The only way to fix this problem is to go to the purchaser after settlement to agree the margin scheme was used. You then still have an additional step in asking the ATO to waive the normal requirement to have this agreed prior to settlement. If this doesn’t occur you have lost the full 1/11th in GST on sale.
[Tip – make sure you can use the margin scheme in the first place]
#3. CLAIMING GST ON A RESIDENTIAL PROPERTY BEING BUILT WHERE YOU INTEND TO HOLD THE PROPERTY.
No GST can be claimed where you intend to rent out a property for residential rent. This is the case even if you intend to sell the property as new residential premises within 5 years of construction.
[Tip – make sure you have considered the cash-flow effect of not being able to claim back GST on construction costs]
#4. FIRST TIME OR PRIVATE DEVELOPERS REGISTERING AUTOMATICALLY FOR GST TO CLAIM CREDITS BACK.
When you undertake a development you need to consider whether or not you should register or if you are required to be registered for GST for your specific development. If you are subdividing land that you have held for a long term for a capital purpose such as rental, then you might not need to register for GST. If you choose to register for GST when you’re not required to by law you could be giving a lot of profit away by unnecessarily paying GST on the sale of the development property.
[Tip – do the maths and seek advice on your personal circumstances]
#5. IF A PROPERTY IS USED COMMERCIALLY THEN IT WILL AUTOMATICALLY ATTRACT GST ON SALE.
This is another common misconception. Traditionally with GST the type of property tends to determine the GST treatment. In other words you should look at the property and understand what its normal form and function is. Don’t just look at how the property is used. This will mean many properties used in a commercial way may not actually be subject to GST.
[Tip – you normally shouldn’t be charging GST to a commercial tenant in this circumstance or claiming back GST credits]
#6. IF YOU HAVE CHARGED OR PAID GST WHERE YOU SHOULDN’T HAVE IS IT DIFFICULT TO DO ANYTHING ABOUT IT?
We have dealt with numerous circumstances on both sides of the fence where we have been able to get a much better GST result. In some cases the ATO has been actively engaged with to ensure a good outcome.
[Tip – it’s still easier and less costly to get it right up front prior to settlement]
#7. IT’S TOO HARD TO GO TO THE ATO TO GET A PRIVATE RULING ON GST.
This is not the case. GST and property tend to be one of the more common rulings the ATO are asked for. They also tend to be quick to resolve where you know what information is required to be provided up front. This is one way to deal with contentious GST matters under contract.
We see these types of mistakes happening all the time [along with many others]. But now over to you, leave your comments below and tell us what other GST mistakes you have experienced on property.
Gold Coast villa is Australia’s most popular Airbnb
A LUXURY Hinterland villa in Mount Nathan has been crowned Australia’s most popular Airbnb listing for 2017.
A STUNNING outlook over the lush green hinterland, a 25m lap pool set up for dive in movies, sunset views from the spa and you can bring your dog (or horse!).
A luxury hinterland villa in Mount Nathan has been named Australia’s most ‘wishlisted’ Airbnb, beating out capital city hot spots.
Topping the list for Australia, the Gold Coast residence is a “luxurious loft-style villa”, with room for 10 people, set on a sprawling four ha property and can be rented for $129 per night.
The host, former financial planner and Vanuatu expat, Kerri-Lea, is an equine enthusiast and there are horses on the property.
“This family plays polocrosse, has horses and stables with daily commitments,” according to the listing.
“The family home is the main house.”
They can also visit nearby award-winning Mount Nathan Winery, the Gold Coast’s theme parks, between a six to 10-minute drive away, or drive to our famous beaches in less than 30 minutes.
It’s listed in good company — the most popular listing in the UK was a Victorian castle, a sea cottage was Denmark’s ‘most wishlisted’, and a lakeside villa topped the travel bucket list in Switzerland.
The top gong comes as the Gold Coast Bulletin reported an Airbnb boom, tipped to contract the tight long-term rental market further as fewer properties are available.
Originally Published: www.news.com.au
Looking to rent? Don’t try this Coast suburb
CALOUNDRA vacancy rates are so tight, a rental can be listed and approved within 24 hours.
Its 0.6 percent vacancy rates are the tightest in the state compared to 1.4 percent for the Sunshine Coast and 2 percent for Brisbane surrounds.
The REIQ released its September quarter vacancy rates yesterday revealing a general tightening of most rental markets throughout regional Queensland as employment opportunities attract workers.
That trend is said to be responsible for the Coast’s low vacancy rates with a smorgasbord of new infrastructure bringing jobs.
Henzells Agency operations manager Katherine Allan said Caloundra West, Golden Beach, and Birtinya were the chief offenders.
“It is very difficult for potential tenants, specifically in the Caloundra West area, we have properties gone within a day,” Ms. Allan said.
“One early this week was listed at 3 pm and someone applied for it and is likely to be approved. They haven’t even seen the property and are going off online only.
“That makes it difficult, great for the landlords obviously.
“With Aura coming in and the new school, being in that catchment plays a massive factor. We have had a large number of inquiries from hospital workers too.”
She said it painted a great picture for potential investors who were spoilt for choice for tenants.
“Most landlords have a choice between multiple tenants and it comes down to past rental references,” she said.
“Some people tend to miss out, sometimes more than once. But we have a leasing consultant who works really hard to avoid that.
“Traditionally we find at this time of year the rates tend to slow down but it doesn’t appear like they will this time.”
Rockhampton, Livingstone and Gladstone shires had the highest rates at over 5.5 percent.
Originally Published: www.sunshinecoastdaily.com.au
Hot market squeezing renters
The May real estate statistics are due out in the next couple of weeks, and they’re expected to show the Sunshine Coast had another month of unusually high sales volume and prices. And that may not be good news for renters trying to find vacancies in a market already rated “severe” by the Rental Housing Index when it comes to affordability and the stock of rental housing.
The Index, created by the BC Nonprofit Housing Association and Vancity Credit Union, puts the Sunshine Coast at 252 out of 284 markets it tracks in Canada (using 2015 numbers). It also says renters make up about 16 per cent of Coast households.
Jennifer Chapman contacted Coast Reporter with her family’s story, which is typical of others we’ve been hearing.
Chapman said she and her husband are young, working professionals with two children. The family moved into a new rental home in February. Now it’s being sold. They signed a two-year lease, which Chapman hopes will give them some protection, but she’s worried about being able to find another place if they need to.
“We’ve actually moved quite a bit because of different situations with rentals,” she said. “Even before [February] we lived in a place where they were going to put it up for sale. That was two years ago. We moved out. We found another rental and we were in that [home] thinking we would stay another two to four years. Then the owners wanted to move back in, so we had to move again. It’s a really hard market, and it’s really hard to find houses within a price range that’s decent.”
Chapman added that their goal is to save enough for a down payment on a house, but steadily increasing real estate prices are making that harder as well.
Holywell Properties is a property management firm serving the Sunshine Coast. According to managing broker Adam Major, they’ve noticed a steady drop in the number of homes offered for rent, leading to what the company estimates is the lowest vacancy rate in a decade.
“We usually carry around 10 to 15 vacancies at any given time, but over the last few months we have averaged three to five,” Major said. “I don’t know that we have more people looking for rentals over what we normally have at this time of year. The issue seems to be a lack of supply, which is brought about by people selling in Vancouver and the Lower Mainland and buying on the Sunshine Coast. The activity in the residential real estate market appears to be taking supply from the existing rental market.”
The Town of Gibsons and District of Sechelt also have on their radar the potential negative impact of more landlords opting to enter the short-term rental market, through services like Airbnb.
In April, Sechelt Coun. Darnelda Siegers noted, “We have issues with Airbnb and VRBO [another popular short term rental service]. In my other job [mortgage broker] I regularly have people approaching me in February, March, etc., of every year, and more so lately, indicating that their rental is no longer going to be available because it’s going to be a short-term rental.”
In a recent report to Gibsons council, planner Andre Boel said, “The exact impact of the ‘sharing economy’ is still unclear. For some people, short-term rental may help to pay for mortgage or other cost. Providing accommodation for visitors may have positive effects for the local economy. On the other hand, it may reduce the number of rental housing units available.”
“I don’t think you can blame individual property owners for wanting to maximize the return on their investments, but the people bearing the brunt of the increase are those on marginal and fixed incomes who can least afford it,” Major said.
Chapman, though, said renters of all backgrounds are in a bind right now. “It’s not just low-income people who are struggling. It’s also middle class people, as well, who are [coming] here to invest in the community. We still struggle.”
Major said he sees things turning around, but not in a hurry, because what it will take is more construction. And, as Chapman sees it, it’s not just more construction, but the type of construction. “In the city there are different types of co-op housing you can get into, or more options on townhomes and stuff. You don’t really have that [here], especially in Sechelt,” she said.
In the meantime, Sunshine Coast renters are likely to continue to feel pressure from an overheated Lower Mainland market.
Originally Published On: http://www.coastreporter.net/
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