15 February 2019
Sale of residential land and GST
I have a client who is selling two residential lots at an auction. The lots have a current development application approval. My client is concerned about having to pay GST on the contract price. The land has an existing residential home on it that has not been newly built.
Could Mentor advise me whether my client needs to be concerned about GST in this instance?
Thank you for the question.
Generally, a seller is not liable for GST if selling residential premises that have been previously sold as residential premises. Sale of residential land is NOT a sale of residential premises and is liable for GST if sold in the course of an enterprise by a vendor who is registered or required to be registered for GST.
In this particular case, if the client is not a developer, that is, not making the sale in the course or furtherance of an enterprise, it is likely that GST does not apply. Consider adding a special condition to the contract to provide that the price excludes GST, and that if subsequently an assessment for GST is issued to the vendor then upon serving the purchaser with a copy of the assessment and a tax invoice the purchaser shall pay the amount of the GST to the vendor and charges the land with its payment. The clause should further stipulate that it is to survive completion.
Regards
Mentor
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