By Registered Conveyancer Mel Wilson
“I’ve sub-divided my property, but no one told me I would have to pay GST when I sold” … sound familiar?
A huge demand for housing and record high prices has seen a surge in opportunistic property development. But hidden costs can quickly bite into your profits, especially GST.
Here’s a common scenario. Jane finds a property she can divide into 5 allotments. She buys the land for $600,000 plus $35,000 in transaction fees. She can sell the new blocks for $175,000.00 each – a starting profit of $240,000. Jane engages a surveyor to prepare a plan of division, and pays the relevant costs to her surveyor and interested Government agencies.
Jane is referred to a conveyancer to create the new titles and the allotments are put on the market and sold. Only at settlement is Jane advised she must pay GST on each of the allotments as they sell, at a rate of 10% or $87,500.00. Why? The ATO introduced the ‘GST at Settlement’ withholding obligation from July 1, 2018. Generally speaking, the sale of either new residential premises or land that could be used to build new residential property is subject to a GST withholding requirement at settlement.
Connolly Wilson Conveyancing works with our clients right from the outset of a project to ensure they have factored in all costs of buying, developing, and selling their properties to help maximise profits and keep the process as stress-free as possible.
Discuss your project with our team today by calling (08) 8591 8257 or visit connollywilson.com.au.