Small-Scale Property Development Part 2: Do You Need to Pay GST?

Do you need to pay GST on a one-off property development? For small-scale property developments, GST can materially affect the sale proceeds. A one-off project can still attract GST, and treating a sale on capital account for income tax purposes does not necessarily resolve the GST position. In Part 2 of this two-part series on tax and property development, Andrew Henshaw is joined again by Tom Warrington, Associate in Velocity Legal’s Tax team, to discuss the GST implications and why they need to be considered before signing a contract. The discussion covers: when a property sale may be a taxable supply; what constitutes an enterprise for GST purposes; why a one-off development can still attract GST; how the GST analysis differs from the revenue versus capital distinction; GST withholding obligations and notifying the purchaser; how the margin scheme may reduce GST payable and the requirement for written agreement; the distinction between existing and new residential premises; why a property’s physical characteristics matter when assessing its residential character; the relevance of rental periods and the five-year rule for new residential premises; and when changes in use or an input-taxed sale may require adjustments to previously claimed GST credits. A practical discussion for property owners, small-scale developers, accountants and advisers considering the GST consequences of property development. Part 1 examines the income tax and CGT implications, including the revenue versus capital distinction, the taxpayer’s intention and the importance of supporting evidence. For advice on the tax treatment of property developments, contact Tom Warrington or Velocity Legal’s Tax team.