Q: A husband and wife bought a residential property in 2011, initially leasing it out as a café. Later, they started a beauty therapy business together until they divorced in 2014. The partnership ended, and one of them continued the business as a sole trader. Now they want to sell the property, and a buyer who isn't registered for GST wants to purchase it as a residential property. What are the GST implications? Is a balancing adjustment needed, considering the partnership ended in 2014?
A: If they sell the property as a residential unit, it triggers a balancing adjustment under the GST Act. This means they need to adjust for any GST they previously claimed when they bought it. The adjustment happens annually, usually at the end of June. Since the property was originally bought by the partnership as part of a GST-free deal, the situation remains the same even though the partnership ended.
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