GST implications
Scenario:
I am a builder, not registered GST, income 2015/16 was $65,000 (expected similar income 2016/17); In July 2016, began to rent out an investment property (finished building in 6/2016), rental income was $2,000 per month;
In 6/2017, a real estate agent asked me if I am willing to sell the property to a client for $550,00. I am interested in selling, but I am concerned about whether I will have to account for GST on the sale.
Could you advise me whether I will be liable for GST on the sale of my property; and does it matter if I actually had registered for GST?
Explanation:
According to GST Act s 9-5, if the supply was a taxable supply, you must either be registered or required to be registered for GST;
According to GST Act s 23-15, you would be required to register if his annual turnover meets the registration turnover threshold ($75,000 per annum, or $150,000 per annum for non-profit bodies); we need to consider both your current annual turnover and projected annual turnover to determine whether you meet the threshold.
According to GST Act Div. 188, nor is turnover from the sale of capital assets, so the rental income and any proceeds from the sales of the investment property are not included when determining your turnover.
So, your current and projected turnover would be $65,000 (below $75,000), which means you are not required to register for GST.
Assuming that you had actually registered for GST before then it needs to be determined if is regarded as a taxable supply.
According to GST Act s 9-5, you meet all the criteria, so the sale of the property is a taxable supply, and Bob needs to account for 1/11th of the proceeds as GST
GST= $550,000 *1/11=$50,000