Significant GST Benefit for Some Property Developers

The Australian Taxation Office (ATO) has had a change of opinion where properties are built for sale, cannot be sold and instead are rented pending sale.

The ATO has just released an ATO ID which significantly changes the public position advocated since the inception of GST regarding the claiming of input tax credits where a property is built for sale, but subsequently rented pending sale.

The ATO position is significantly more favourable for taxpayers.

Where:-

• a property is developed with the original intention to sell all completed properties;
• full GST credits are claimed;
• on completion not all properties are sold, and some are rented out to assist meeting holding costs;
  
• while being rented, the properties continue to be held and marketed for sale;
• only a minimal GST adjustment is required

The general ATO view has been that when property is rented, 100% of the GST credits claimed relating to the construction of the property needed to be paid as a GST adjustment.

As the changed position is a significant concession, any taxpayer that has used the previously advocated position, should urgently review their position with a view to seeking refunds of any GST credits previously adjusted.