Are you in the business of buying and selling property?

This GST advice could save you thousands!

 If you are in the business of buying and selling property one of the most important tax matters you need to consider is the option of calculating GST using the margin scheme. Using the margin scheme will not only increase your profits, but will decrease the cash you remit to the ATO, on the sale of the property.

 Normally, when you sell a product, the GST you remit to the ATO will be one-eleventh (1/11th) of the sale price. However, when using the margin scheme the amount of GST you pay on a property sale will be one eleventh (1/11th) of the margin. The margin is generally the difference between the sale price and purchase price of the property.

 There are several important factors that need to be considered before using the GST margin scheme. 
  
Some important points are that you need to purchase the property off someone that:
 • is not registered or required to be registered for GST; or
 • Who sold you existing residential property; and
 • The property is part of a GST free going concern; or
 • The property is sold using the margin scheme.
 
There are also legal matters that need to be considered which extends to including a clause in the sale of the property that advises the buyer that you are selling the property using the GST margin scheme. Hence when it comes to the contract of sale, working with your conveyancer for the correct wording of the clause is essential.
 
For more information, please feel free to contact us at Jewell Moore Chartered Accountants
 Written by Leanne Apiata, Senior Accountant @ Jewell Moore Chartered Accountants