GOODS & SERVICES TAX AND ITS IMPACT ON PROPERTY TRANSACTIONS
TERMS AND THEIR MEANING
If you make a supply through an agent, you are liable for GST, and not the agent. If you acquire through an agent, only you can claim the GST credit. However, if a non-resident acts through an agent resident in Australia, the agent is responsible for GST consequences.
Commercial residential premises
These include hotels and caravan parks. The sale of these premises is subject to GST. Special rules apply where these premises are rented on a long-term basis.
Anything of value provided in return for a supply of goods and services. It includes acts of forbearance. A supply is not subject to GST unless there is consideration.
This is an acquisition that you can claim a GST credit (“input tax credit”). For you to have a creditable acquisition, you must be registered, GST must have been payable, and you must have acquired it for a creditable purpose, which means you must acquire it for business purposes that are not input taxed.
If you carry on an enterprise, you can register, charge GST on your supplies, and claim GST credits on your acquisitions. An enterprise includes all types of business activities, but does not include the activities of employees.
Financial supplies are input taxed. This covers most services provided by banks and financial institutions, such as loans. They cover certain services provided by brokers, life insurance companies, investment managers, and superannuation funds. The provision of advice is not a financial supply.
The sale of a going concern is GST-free, subject to various restrictions. A going concern means a continuing enterprise and the sale of a business, or of a tenanted commercial building, may be GST-free.
If a supply is GST-free, no GST is payable on it. However, any GST that has been paid at earlier stages can be claimed as a GST credit. The main GST-free supplies are exports, sale of businesses, international travel, health, food, education, childcare, certain farm subdivisions, and certain activities of charities and religions.
Input tax credit
A credit for the GST payable on your business inputs and to claim the credit, you must be registered and in business. GST credits are offset against the GST you charge each tax period.
Input taxed supply
If a supply is input taxed, no GST is payable on it. You do not charge GST on these supplies, nor are you entitled to input tax credits for business purchases. Input taxed supplies include financial services and residential rents.
The sale of freehold interests and other interests in property, which attract GST, can be made more attractive to purchasers who cannot claim input tax credits by adopting the Margin Scheme. Under the Margin Scheme, GST is calculated on the margin between the value of the property at the date of sale after 1 July 2000, and the value of the property as at 1 July 2000. The GST component is one-eleventh of the margin.
Opportunity to review
If you have a contract that straddles the 1 July 2000 commencement date for GST, its exposure to GST after that date may depend on whether the contract contains an opportunity to review the price to take account of GST.
The entity to which a supply is made, and in the case of a sale, for example, it would be the purchaser.
You will be entitled to a refund if GST credits exceed GST for a tax period, after taking adjustments into account, visiting tourists may also be entitled to refunds of the GST paid on purchases they take home with them.
You can only be registered if you are carrying on an enterprise. Whether you are required to register depends on your annual turnover. Registration is relevant because GST:
Is not payable on a supply unless the supplier is registered
Credits can only be claimed if you are registered
Returns must be lodged if you are registered
The sale of residential premises is input taxed. However, the sale of new or commercial residential premises is subject to GST. Residential rent is not subject to GST but special rules apply to long-term commercial residential accommodation.
GST is payable on taxable supplies. To be taxable, the supplier must be registered and in business, the supply must be consideration, it must be sufficiently connected to Australia, and it must not be GST-free or input taxed.
A special type of invoice that contains specified items of information including the supplier’s Australian Business Number (ABN). Generally, you must hold a tax invoice for a purchase or acquisition at the time you lodge your GST return for the period in which the claim for a GST credit is made.
GST liability (or entitlement to a refund) is worked out for each tax period, which may be monthly or quarterly.