GST and Small Scale Property Development


GST is about to have its 20th birthday having been introduced into Australia on 1 July 2000. For the majority of accountants and tax practitioners, GST issues in relation to real property transactions have, undoubtedly, been those that have created the most difficulties. Although most of these issues have existed since the introduction of GST, they continue to challenge tax practitioners. This is particularly so in relation to small-scale property development.

Many Australians have seen a path to increased wealth through small-scale property development. By this I mean such things as:

  • subdividing a main residence block of land and either selling off vacant land or constructing a new residence on the vacant land with a view to selling the new residence or renting it out
  • purchasing a residence, subdividing the land and undertaking developments that might include demolishing the existing residence (or not) and constructing new residential premises
  • extensive renovations of an existing residence with a view to selling it or renting it
  • subdividing the main residence block of land and constructing a new residence on one of the subdivided blocks with a view to living in the new residence and either selling off or renting out the existing residence
  • purchasing a vacant block of land, (often) subdividing the land and then developing the land by building new residences and either selling them off or renting them
  • other variations.

These issues create particular problems under the Australian GST law due to the small scale of the operation. With large-scale operations, the GST issues can, in fact, be easier on which to advise.

At Tax & Super Australia, we receive many calls in relation to the GST implications of small-scale property development. The purpose of this paper is to discuss some of those issues and, to the extent that it is possible, to provide guidance in relation to those issues.

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Author: Tax & Super Australia


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