Question

QUESTION 10

Arthur is a property developer and purchased a house on a large block of land. The house was purchased in 2018 for $880,000. Arthur reconfigured the lot into two separate lots in May 2019 and at this time the land was valued at $770,000. He moved the existing house to the left-hand side and then constructed a new house on the right-hand side. The existing house (House 1) sold in January 2020 for $770,000. The new house (House 2) cost $550,000 (GST inclusive) to construct and was sold in February 2020 for $990,000. There were also legal fees associated with the property development of $11,000.

REQUIRED

Explain to Arthur the GST consequences of the sale of House 1 and House 2.

You are not required to perform calculations to answer this question.

Answer 1

The sale of buildings by developer is subject to GST if the building constructed is sold befor the completion certificate is issued by the competent authority or first occupation by the purchaser whichever is earlier and in the gives Case House 2 if sold before completion or first occupation is liable for Goods and service tax otherwise exempted.

And in the case of House 1 kt was moved to the left side which also comes under construction and it is sold after it is moved therefore GST is liable for house 1 also if the completion certificate is received after the sale.