Question: We have a client who got $82,000 (excluding GST) from Origin Energy for the option to buy an easement on their property. The client isn't registered for GST because their income is less than $75,000 per year. But since the payment is over $75,000, do they need to register for GST and tell the tax office about the GST on the option money? The option is a one-time payment, so they don't have to register for GST regularly. Also, how do they deal with tax for the option to buy the easement and when they actually buy it? Are these considered Capital Gains Tax (CGT) events, and what counts as the cost base? For example, are legal fees the only cost for the option? And is a portion of the land's cost base the cost for buying the easement?
Answer: No, GST doesn't apply to granting the option to buy the easement because it seems to be on capital account. So, the $82,000 doesn't count towards the client's GST turnover. This means no GST needs to be charged. Granting the option is likely a Capital Gains Tax event (CGT event D2). The only cost for the client would be the legal fees. Since no part of the land is being sold, the land's cost base can't be used for the CGT event.