Property sector - GST update

23 July 2019

Hung Tran , Partner, Business Services |
Leisa Rafter , Partner, Tax |

The ATO is increasing its audit activity and actively pursuing property developers for failing to repay input tax credits (ITCs) of the GST claimed where there has been a change in the intended or actual use of a property development.  This activity has become more pronounced with the current downturn in the housing market.

The increased ATO activity has been identified as developers are frequently having to rent new residential premises rather than sell while awaiting more favourable market conditions.

This change in purpose can result in developers being required to repay considerable amounts of over claimed ITCs and potentially significant penalties.

The quantum of any repayments to the ATO can be a very involved and complex calculation and it is important to voluntarily disclose any repayments to the ATO to avoid or reduce penalties.

This may be relevant to you if:

  • You developed residential premises and have since commenced leasing/renting the premises to tenants
  • There has been an increase or decrease in the rent received compared to initial rental income projections
  • There has been a change in the marketing strategy of the premises (eg. leasing vs sale)

What you need to do:

BDO has regularly assisted property developers in this area in the past. With the increased ATO activity identified, it is important for you to urgently review any potential over claimed ITCs resulting from any change in use of a property development so as to minimise any possible penalties before the ATO commence audit activity. 

If you feel you may be directly affected, we recommend that you take urgent action now to review the situation. We would be happy to arrange a call to discuss how we can assist.