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.
Queensland landlords, property managers go above and beyond
The team Australia mantra has not been lost on Queensland landlords and property managers, with new research showing they have performed more than double the heavy lifting expected of them.
With over 1,200 REIQ property management member agencies surveyed throughout Queensland, the results show that only 6.05 per cent of residential rental tenants qualified as “COVID-19 impacted” under the state government’s COVID-19 Emergency Response Regulation.
This represents approximately 3,950 renters from a state total in excess of 577,000 residential tenancies.
Despite 3,950 tenants qualifying, over 10,800 tenants in Queensland have received rental assistance during the COVID-19 pandemic.
REIQ CEO Antonia Mercorella said industry data like this is vital to help understand the essential nature of the real estate sector during unique circumstances such as the COVID-19 pandemic and its role in supporting the broader Queensland economy.
“The role our industry’s property managers have played throughout this pandemic is truly exemplary,” Ms Mercorella said.
A tenancy is generally deemed to be “COVID-19 impacted” if a tenant is impacted by COVID-19 in certain ways and, in addition, the tenant has suffered a loss of income of 25 per cent or more, or the rent payable is 30 per cent or more of a person’s income.
A majority of negotiations achieved a satisfactory outcome regarding temporary rent reductions, with fewer than 800 referred to the Residential Tenancies Authority for further conciliation.
The bulk of these temporary rent reduction reviews took place across Brisbane (37.2 per cent), Gold Coast (14.88 per cent),Coast (12.09 per cent) and Cairns (6.51 per cent), with the majority of tenants requiring a rent reduction of up to $100 per week (69.3 per cent).
A further 23.72 per cent of rental tenants have required a temporary rent reduction of up to $200, 5.12 per cent a reduction of up to $300, and 1.86 per cent a reduction of over $300 which represents just over 200 tenants.
This article is republished from www.smartpropertyinvestment.com.au under a Creative Commons license. Read the original article.
Only 6% of renters qualified as “COVID-19 impacted”: REIQ
A recent industry survey conducted by the Real Estate Institute of Queensland (REIQ) reveals that Property Managers across Queensland’s real estate industry have performed more than double the amount of ‘heavy lifting’ when it comes to rent negotiations between landlords and rental tenants.
This is outside of the Palaszczuk Government’s Residential Tenancies and Rooming Accommodation (COVID-19 Emergency Response) Regulation 2020.
REIQ CEO Antonia Mercorella says industry data like this is vital to help understand the essential nature of the real estate sector during unique circumstances such as the COVID-19 pandemic and its role in supporting the broader Queensland economy. “This member survey aimed to identify a whole-of-industry snapshot in regards to the important role and to what scale our sector played in negotiating temporary reduced rents on behalf of more than 14,000 rental tenants with their landlords,” explains Ms. Mercorella. “Real estate professionals manage close to 600,000 Queensland households through property management services. The demand for more effective recognition of our industry during any future crisis of this nature is now more apparent, with property managers overseeing more than a double caseload of temporary rent reduction requests from tenants suddenly faced with the inability to fulfil their rent obligations.”
With over 1,200 REIQ property management member agencies surveyed throughout Queensland, the results show that only 6.05% of residential rental tenants qualified as “COVID-19 impacted” under the State Government’s COVID-19 Emergency Response Regulation. This represents approximately 3,950 renters from a State total in excess of 577,000 residential tenancies (Census, 2016). A tenancy is generally deemed to be “COVID-19 impacted” if a tenant is impacted by COVID-19 in certain ways and in addition, the tenant has suffered a loss of income of 25% or more, or the rent payable is 30% or more of a person’s income. A majority of negotiations achieved a satisfactory outcome regarding temporary rent reductions, with fewer than 800 referred to the Residential Tenancies Authority for further conciliation.
Furthermore, Property Managers proactively negotiated an additional 14% of temporary rent reduction requests beyond the COVID-19 Emergency Response Regulation, representing over 10,800 residential tenancies. That’s more than double the amount of qualified lease renegotiations recognised as ‘COVID-19 impacted.’ The bulk of these temporary rent reduction reviews took place across Brisbane (37.2%), Gold Coast (14.88%), Sunshine Coast (12.09%) and Cairns (6.51%) with the majority of tenants requiring a rent reduction of up to $100 per week (69.3%). A further 23.72% of rental tenants have required a temporary rent reduction of up to $200; 5.12% a reduction of up to $300; and, 1.86% a reduction of over $300 which represents just over 200 tenants.
“By the time the Prime Minister’s proposed protective measures for residential tenancies via a six-month moratorium on evictions reached the Palaszczuk Government, a highly-coordinated industry campaign for more fair and balanced protections for both tenants and landlords ensued,” says Ms. Mercorella. “However, the REIQ recognised that many rental tenants and landlords simply couldn’t wait. Large scale job losses were already in motion, with the entertainment, events, food and beverage, and tourism industries virtually grinding to a halt overnight. As a result, we were quick to work proactively with Property Managers across our member agencies to achieve an immediate framework of resources for tenants and property owners in significant financial distress to come together to negotiate temporary rent reductions in order reach an amicable outcome for both parties.
“The role our industry’s Property Managers have played throughout this pandemic is truly exemplary,” adds Ms. Mercorella.
This article is republished from www.propertyobserver.com.au under a Creative Commons license. Read the original article.
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
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