Q: The client's turnover for the year ending June 30, 2017, is expected to be $3.13 million, compared to $1.05 million in 2016. They run a business, not a charity or non-profit, and they handle income tax based on cash flow.
Q: Back in 2008, my client got into a deal to use some computer software owned by another company. They agreed to pay ongoing royalties of about $110,000 a year, which is 15% of the software's earnings. Now they've decided to change the deal. Instead of paying yearly, they're giving a one-time payment of $650,000 for ongoing use of the software. There was no GST during the original deal.
Q: There's a valuable house in Sydney owned by Mr. and Mrs. X. They live there. Mrs. X wants to renovate the house, spending about 23% of its current value. They don't want to pay extra taxes for transferring part of the house to Mrs. X. So, they decided she'll lend the renovation money to Mr. X, secured by a mortgage. Mr. X will then pay back 23% of the house's value when repaying the loan, or 23% of the sale price if they sell the house. The renovation could increase the house's value more than the money Mrs. X loaned. If Mrs. X owns part of the house, she won't pay taxes when selling it, as long as it's still their main home. But if they use a mortgage, the tax treatment is different. Is a mortgage taxable? If so, would the extra money paid back be a profit subject to tax? And would they get a tax break if they hold the mortgage for over a year before repaying it?
Q: A client is buying a commercial property with a tenant, which means the purchase is GST-free because it's considered a going concern. However, the client plans to divide the land and build three residential townhouses. How does the client calculate the GST margin when selling these properties? (Note: The owner originally phased the property before June 2000, and it's been used for commercial purposes since.)
Q: Section 38-480 states that the land must have been used for farming for at least five years before the sale to qualify for GST-free status. What happens if the farming business has stopped, even though the land was a farm for longer than five years? This concerns a large farming property in the Northern Territory that has been divided into smaller parcels. The head of the family managed the farming and subdivision but passed away unexpectedly about 18 months ago, after which the farming business wasn't actively pursued.
To calculate GST using the margin scheme, subtract the purchase price of the property (excluding development costs) from the selling price. This gives you the margin, on which GST is calculated. Then, add this GST to the selling price to get the total amount the buyer pays.
For example, if you sell a property for $1 million and the margin (calculated as explained) is $300,000, then the total amount the buyer pays would be $1.3 million.
In the profit and loss account for tax purposes, you would record the sale as revenue of $1 million. However, for expenses, you would list the cost of the property plus any development costs (excluding GST).
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers. You can also book an appointment through our live calendar.
Q: Two unrelated parties, A and B, jointly own a commercial property. They are both registered for GST jointly for this property. If A sells its share of the property to a third party unrelated to A or B, is it a non-taxable supply since A is not individually registered for GST?
A: When a partner sells their share in a partnership, it's not considered outside the scope of GST. Instead, it's treated as if all the partnership assets are being sold to a new partnership. This means it could be a taxable supply. However, it might also qualify as a GST-free supply if it meets certain conditions. Even if it's taxable, the new partnership can claim an offsetting input tax credit for the GST paid on the sale, so it's not a long-term financial loss.
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers. You can also book an appointment through our live calendar.
Q: A client sold their company, which includes selling the goodwill and other factors like stock. The contract includes transferring stock based on a report every two months, capped at $600,000 excluding GST. Is the stock sale subject to GST, or is it part of the sale of a going concern and GST-free?
Q: A person has a business partnership with a retirement fund (SMSF) where the fund owns some land and the person's company pays for developing it. The person gets an extra 1.5% fee on top of the development costs. The payment happens only after the project is done and the land is sold. The retirement fund will legally own the land. There's a rule saying that when the land is sold, the money will first go to any lenders, then other parties, then cover the costs and fees, and finally to the retirement fund. The question is: Should the retirement fund collect all the sale money and pay the appropriate taxes, while the person sends a bill to the retirement fund for their share?
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