Margin scheme on new development

[summersummer]

Hi,

I am newbie to IP and had a few questions on the margin scheme after reading the documents on ATO's website.

I want to buy land from a land developer(with no GST) in a company name(not registered for GST) and have a builder construct a house on it.

As the land developer is registered for GST, although I am buying the land without GST am I eligible to use the margin scheme when i sell the property?

Also will I be able to claim GST on the construction costs from this?

Thanks in advance

 

[Aaron_C]

There's several issues here:

1. Are you required to be registered for GST?
2. What is the purpose of the purchase? An investment property or something else?

Generally speaking if you are just buying the property to rent it out and have no intention to develop it then you do not have to pay GST when you sell it but you can't claim GST input credits during construction either.

The margin scheme is meant to target developers who buy land, build on it and sell to home buyers. The ATO views this activity as 'commercial' or an 'enterprise' and therefore any sale the developer makes is considered a taxable supply that attracts GST. If there is no enterprise and you are just doing it for personal investment (despite the company name) then you do not have to charge GST upon sale of the new property.

 

[summersummer]

1. Are you required to be registered for GST?
2. What is the purpose of the purchase? An investment property or something else?

1. I am setting up a company for this purpose only, to build on vacant land. However lets say I sell the house for $500k straight after building that will be my turnover right? As its over $75k am i right is saying I need to be registered for GST? Or does it work differently from what I think and i dont need to be registered?

2. Purpose is purely to build in my company name and sell to a home buyer. From what you mentioned looks more like inestment purpose in our company name with 2 directors. So i'm assuming we dont have to charge GST when we sell the property? But can we claim back GST on construction?

If not then we can consider to do this as a commercial activity and as a developer use the margin scheme to charge the home buyer with GST and claim back GST on construction? In this case do we need to register for GST assuming turnover is $500k and be able to use margin scheme?