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GST for the royalty payment

Q: In 2008, parties entered into a royalty contract for the use of a computer software developed by another independent entity. Under the terms of the terms of the royalty contract, the intellectual property rights subsisting in the software were assigned to my client in consideration of ongoing royalty payments, which were calculated at 15% of income generated by the use of the software (approximately $110,000 per annum). The parties have now agreed to vary the contract to end the ongoing royalty payments and replace them with a one-off payment of $650,000 for the ongoing use of the software. During the contract period, no GST.

CGT treatment of mortgage

Q: A valuable Sydney residential property is in the sole name of Mr X. and Mrs X use the property as their principal place of residence. That the property will be substantially renovated at the sole cost of Mrs X. The cost of those renovations will represent about 23% of the current value of the house. The couple do not wish to incur the New South Wales stamp duty cost of transferring a 23% interest in the house to Mrs X. The alternative they have agree on is that Mrs X would lend the money to Mr X on a mortgage basis. Repayment of that Mortgage requires Mr X to pay 23% of the valuation of the property determined at the time of repayment or 23% of the sale proceeds if the discharge of the mortgage was in connection with a sale. It is likely that 23% of the future valuation or sale proceeds would excess of the monies now loaned by Mrs X to fund the renovations. If Mrs X became a part owner of the property, her share upon disposal would be CGT exempt if it continued to be her principal place of residence. However, what would the CGT treatment be if the transaction was structured by way of mortgage? Is a mortgage a CGT asset? If so, would the excess between the amount loaned and the amount ultimately repaid be a capital gain? If so, would the general discount apply if the mortgage was held for more than 12 months before discharge?

GST for the rented cottage out the back of a commercial property

Q: Ms. C has a commercial property that has a gatekeeper's cottage out the back. This cottage is rented. The main building is still to be rented but is available for rent. Does the cottage rent incur GST as it is part of the commercial property or is it considered residential?

Margin scheme of selling the commercial property

Q: A client is purchasing a commercial property with tenant on a going concern basis so it is GST-free. The client plans to subdivide the land off the back of this block and build three residential townhouses. On what basis does our client calculate the GST purposes margin when selling the properties? (the owner phased the property pre-June 2000 and it has been commercial in the future.)

GST-free supply of a farming business requirements

Q: Section 38-480 refers to the land in question being land on which a farming business has been carried on at least five years preceding the supply. What is the situation if the farming business is not being carried on supply even though the property has been a farm for a longer period than five years? It is a large-scale farming property in the northern Territory that has been subdivided into smaller parcel. The patriarch of the family was the driver for the farming business and the subdivision proposal. He died unexpectedly about 18 months ago and after that, the primary introduction business has not been actively pursued since shortly before the patriarch’s death.

GST using the margin scheme & treatment in profit and loss

Q: Please advise on how to calculate GST using the margin scheme and the treatment in profit and loss account for tax purposes.

Partnership ‘s shares sales incur which kind of GST supply

Q: A commercial property is owned as tenants in equal shares by two unrelated parties – A and B. Neither A or B are registered or required to be registered for GST individually. They are registered for GST jointly to this property. If A sells its interest in the property to an unrelated third party (not related to A or B), is it a non-taxable supply by a person who is neither registered nor required to be registered?

GST of the transferred stock

Q: A Client completed a contract for the sale of the company (he owns all the shares). The contract contains several requirements for the consideration to be paid, including the sale of the goodwill and other adjustment factors. It also contains a clause that stock will be transferred to the purchaser based on a two-monthly report on the usage of the stock. The total for the stock sold cannot exceed $600,000. The amount excluding GST. Is this stock sale subject to GST or is it part of the sale of a going concern and GST- free?

Sale of the dwelling attracts GST

Q: A client purchased a farm GST-free as it is a farming business on which there was also a residential dwelling. The client then sold the dwelling, which will be moved roughly 30km away. Does the sale of the dwelling attract GST?

GST Credits for the sole trader

Q: The client is a sole trader. They wish to claim GST credits on some business lunches. As they are not an employee, the fringe benefits tax (FBT) regime for entertainment does not apply. Assuming the lunches were business-related, can they claim the GST credits? The client wants to claim GST on motor vehicle expenses, is it permissible (using the cents per kilometer method for tax purposes)?

Joint venture (JV) GST between companies

Q: A client has an unincorporated joint venture (JV) in place between his development company and SMSF that owns land. The SMSF owns the land unencumbered and the development entity is paying for the total cost to real property. The developer is entitled to a “fee” of 1.5% over and above the cost of development. The costs and the fee will only be payable to the developer once the project is complete and the sale proceeds of the project. The landowner (SMSF) will be the legal and beneficial owner. There is a clause in the agreement that the sale proceeds payment will be allocated to any lenders, any other third parties, the developer for costs and fees and the landowner in an order. The question is that is the correct process for the SMSF to bank all sale proceeds and remit the relevant GST and developer to issue a tax invoice to the landowner for their proceeds share?

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