GST & Tax Hurdles in Real Property: Mastering the Pressure Points - 5 program on-demand series

Program 1: The Small Scale Developer: Key Tax Issues

You would think that when it comes to property development, that the tax complexities would diminish the smaller the project. However, it is those smaller projects that often fall into that grey area of whether they are an “enterprise” for GST purposes, or whether the project is on revenue or capital account for income tax purposes. This session attempts to find the tipping point on these issues, including:

• How income tax can apply to the two lot subdivision (McCarthy v FC of T [2021] AATA 1511)
• Whether both the revenue and capital gains tax provisions apply to a small scale property development concurrently, and if so,
  • how is the taxable income or loss on the project calculated
  • does this impact on the 50% CGT discount? (sec. 118-120 ITAA 1997)
• How is the taxpayer fairing, arguing capital for a property development, when the ATO is arguing revenue? (incl. PBR 1052191971521)
• At what point does a property on revenue account get characterised as trading stock?
• Practical examples highlighting how to apply the income tax rules to land owned by three individuals, when:
  • three units are built, then
  • a three lot subdivision is performed, and
  • each individual is then allocated 100% ownership of one lot

Program 2: Is Living in Your Own Home a Private or Commercial Decision?

A recent AAT case has dealt with the question of what was the most significant reason for a taxpayer residing in their own home. Was it to live in it or was it for a profit-making purpose? This session takes a look at that case, as well as how the principles could apply to a number of other scenarios involving the family home, including:

• Claiming a revenue deductible loss on the main residence (Bowerman v FC of T [2023] AATA 3547)
• How do you determine the “significant” purpose for acquiring a home?
• How to address the “onus of proof” for grey area situations
• How the Bowerman decision could impact on:
  • builders building their first dream home, then their second, then their third…? (TD 92/135)
  • homes purchased and sold in the short term with significant improvements undertaken during the ownership period?
• When you live in a property however the ATO still consider the property to be trading stock (Makrylos v FC of T [2023] FCA 971)
• Whether there is any scope for private use apportionments when a main residence sold had both a private and profit-making purpose
• Practical examples of properties lived in and acquired with a profit-making purpose in mind

Program 3: Changing Intention Can Change the GST

There are numerous reasons why a property’s intended use can change. These changes can result in calculations required to be performed to adjust GST input tax credit entitlements either up or down. This session looks into how the GST adjustment rules apply to property, including:

• Situations that trigger the GST adjustment provisions
• How the adjustment periods apply to property
• “Dual purpose” situations – ie. building to sell and then renting whilst attempting to find a buyer
• Interaction of the adjustment rules with the “5 year rule” for new residential premises (GSTR 2009/4; Domestic Property developments Pty Ltd as trustee for the DALS Property Trust v FC of T [2022] AATA 4436)
• How the GST adjustment rules can apply to property sold as GST-free farmland
• How to calculate the adjustments
• How to:
  • report increasing or decreasing GST adjustments on the BAS
  • account for increasing and decreasing GST adjustments for income tax purposes
• Practical examples of GST adjustment calculations

Program 4: How the GST-Free Going Concern Concession Applies to Property

Whilst the GST-free going concern concession can include property, the application is limited to certain scenarios and you do need to tick off a number of requirements. This session explores the requirements, including:

• The GST-free going concern conditions and how property fits in with those requirements
• Whether the sale of business property with or without a corresponding sale of the business, attracts the GST-free going concern concession
• Whether eligibility to the GST-free going concern concession is affected if the business and property are held in separate entities
• Whether the GST-free going concern requirements are met if a business is sold and:
  • the business property owned by the vendor or an associate is not offered for sale or lease
  • the business property owned by the vendor or associate is offered for sale or lease, with the offer declined
• Whether a lease of business premises not owned by the vendor has to be assigned to the purchaser for GST-free requirements to be met
• Dealing with periodic tenancies and tenancies at will when applying the GST-free supply of a going concern conditions (GSTR 2002/5)
• Case law regarding GST-free going concern issues involving property (incl. Aurora Developments Pty Ltd v FCT [2011] FCA 232)

Program 5: GST and Deceased Estates Involving Property

Whilst it may not be a regular occurrence, when a deceased estate does come across your desk, you do need to get up to speed on the tax obligations that need to be addressed. This session looks into the GST implications for deceased estates when property is involved, including:

• GST impact when executor cancels a deceased persons GST registration that involved property
• Whether any GST adjustments are required if the deceased had previously claimed input tax credits on the acquisition of the property (sec. 139-5 GST Act 1999)
• When an administrator of a deceased estate is required to register for GST when property forms part of the estate (Nerang Subdivision Pty Ltd & Ors v Hutson & Anor [2023] QSC 268 49 QLR)
• How the margin scheme applies to property acquired by the deceased and subsequently sold by:
  • the executor
  • a beneficiary
• Factors that turn a property owned by the deceased into a GST “enterprise”, when the executor readies the property for sale
• GST issues encountered when land is sold to repay funds owed to a deceased estate (San Remo Heights Pty Ltd v Commissioner of Taxation [2020] AATA 4023)
• Practical examples