Buying Land and GST

On a recent land purchase we were made aware of the potential that the buyer may have to pay land tax.

The only way we discovered this was reading the contract for sale.

Here at Kathryn Hall Agency we read everything that is attached to the purchase of property just so we can make sure there are not any traps that our clients could fall into.

Luckily we did read the contract and took note of the special conditions, as in fact the GST on vacant land is now added to all the contract for land. It was also interesting that the contract for sale I was given was in a new format too, just to make it more confusing.

So, what and why is the GST tax in a contract for land?

It appears that the reason the GST condition has been automatically added to a contract for sale of a vacant block is due to this:

• Since GST inception, vacant land that is sold with a Development intention such a package to buy the land and house with the developer building a house for you on that site it will attract GST.

• It appears that a number of Developers collected the GST on their house and land sale packages but just somehow forgot to pass on the GST to the ATO.

• ATO (the Australian Land Taxation Department) decided to make sure that the GST was paid directly to them and to guarantee that ATO got their tax share they now have included within the Contract for Sale

• This only is where there is a house and land package OR where the land has been developed since the GST was created

• If you buy vacant land that has never been built on and has been owned by previous owners there is no land tax and the special condition does not apply

Trying to navigate through all this was challenging especially when we called our conveyancer, the owners conveyancer our accountant, our book keeper and looked it up on the ATO web site.

We were able to work our way through and finally the purchase price did not involve GST as the property has been owner by at least 2 other previous land owners, potentially saving our purchasers thousands of dollars and not at least ,the stress of uncertainty .

Are you needing help with your property purchase? Speak to us, give us a call or send us an email.

We love buying property

Kathryn Hall