BUILD-TO-RENT
Many SMSFs are interested in building-to-rent, which refers to residential developments built with the intent to rent out long term once complete.
Build-to-rent residential accommodation is input taxed, which means:
- your SMSF cannot claim GST credits on construction and other costs relating to leasing a residential home; and
- GST does not apply to rent received.
USING THE MARGIN SCHEME
The margin scheme is a way of working out the Goods and Services Tax (GST) payable when selling property as part of your SMSF's business. You must be eligible to apply the margin scheme.
Generally, the GST is based on the difference between:
- the price paid for the property when it was first purchased, and
- the subsequent sale price of the property.
There must also be a written agreement with the purchaser before the settlement date to sell the property using the margin scheme.
The GST property decision tool on the Australian Taxation Office (ATO) website can help with checking your eligibility and calculating the margin.
CHANGE IN CREDITABLE PURPOSE
A change in how the property is used may trigger a change in 'creditable purpose'. An example is building to sell, but then deciding to rent the property out while finding a buyer.
When a change in creditable purpose occurs, it can alter the amount of GST the SMSF can claim on their acquisitions.
Keep records to help to determine if an adjustment to GST credits needs to be made for credits already claimed.
GST AT SETTLEMENT
Sales of new residential homes, land and potential residential land may be subject to the 'GST at settlement' withholding measure. If they are subject to this withholding measure, GST is included as part of the sale price, however, when settlement occurs, the purchaser must:
- pay the withheld amount of GST direct to us; and
- pay the balance of the sale price of the property, minus the withholding amount, to the supplier.
Once payment has been received, the ATO match up the supplier's ABN when they lodge their BAS and the GST credit is applied to the supplier's account.
If suppliers do not lodge their activity statements and include the property sale, the credit cannot be transferred to them.