A Practical Guide and Checklist
Buying a development site, deciding whether to use the margin scheme, renting unsold homes, or developing with another party? This guide identifies the GST questions to review at each stage and points to the article that deals with it.
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Follow the link below to start from the beginning.
Five facts run through all four situations: who the supplier is, what the premises physically are, how the land was acquired, what you actually do with the stock, and who holds the money at settlement. They are the starting point for reviewing a project’s GST position rather than the whole of it, because what happens after settlement can change the answer.
What a Westcourt review produces
Westcourt reviews how the proposed acquisition, development and sales structure affect both the GST position and the cash the project needs to complete. The output depends on the stage: a written assessment of the acquisition with the GST matters for your solicitor, a margin scheme model comparing the routes lot by lot on stated assumptions, a position paper and reporting calendar on unsold stock, or a review of a development agreement.
The scope depends on the decision you need to make and the information already available, and is agreed with the fee before work begins. Westcourt acts as the tax adviser on the project, working with whoever runs your finances, whether that is a CFO, a finance team or the owner, and with your solicitor, with responsibilities agreed at the outset.
Western Australian state taxes, in brief
GST is Commonwealth. Western Australian state taxes sit alongside it and need to be included in the project’s feasibility.
- Transfer duty runs on a single general scale unless a concession applies. The separate residential rate ended on 1 July 2022
- Foreign transfer duty of 7 per cent applies to foreign buyers of residential property. Developer relief exists for ten or more dwellings, by reassessment and refund, with milestones keyed to the first dwelling or lot. Amending legislation was before Parliament at the review date. Check the position at your transaction date
- Land tax and MRIT are assessed on 30 June holdings. A subdivider can apply for one year on undeveloped value for vacant residential lots, by 30 June, and the deadline does not move
- A partition between co-developers has its own duty and GST consequences
- An entity acquisition brings landholder duty into play
Getting your lawyers on board to handle the WA state taxes is just as important as the GST. The two advisors must work collaboratively.
The two assumptions that create problems
That whatever GST the vendor charges can be claimed back. And that the margin scheme is always available to a residential developer. Neither holds without checking.
GST checkpoints across the project
- Confirm the proposed GST treatment of the property
- Check supplier and purchaser on ABN Lookup and against title
- Ask how the vendor acquired the land and what it paid
- For a going concern, confirm registration, the written agreement and that the enterprise is still going
- Ask whether the margin scheme will be available and how the margin will be calculated
- Assess any increasing adjustment on leased residential premises
- Test any development agreement against both partnership definitions
- Consider a joint private ruling with the vendor
- Fix the registration date, the credits and the adjustments that will follow
- Decide which entity is registered and which claims credits, and match the invoices to it
- Elect monthly tax periods so refunds arrive sooner, and lodge promptly once each period ends
- Treat any GST holdback into trust as a tax question first and a drafting question second
- Make the margin scheme written agreement by the deadline, on every lot where it is to apply
- Build the withholding notice into the sales process and budget for the amount held back at each settlement
- Use the adjusted consideration for the margin and the unadjusted contract price for withholding
- Decide the on market or off market position before any unit is leased, and record it
- Identify which acquisitions carry adjustments and for how many periods
- Diarise the 30 June reporting for each year the position runs
Speak to Westcourt
Westcourt has advised Perth property developers, builders and private family offices on property and tax since 1998. Tell us the stage of your project and the decision you need to make, and we will identify the appropriate scope of review and what it produces.
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