Thursday, December 3rd, 2009
A recent case provides a warning for anyone thinking about developing a property and trying to skip paying GST on the sale. In Khoury v Federal Commissioner of Taxation, Administrative Appeals Tribunal (AAT) 2009, the taxpayers were fined $162,405 for failing to disclose the sales of new townhouses in their Business Activity Statement and a further $32,481 for obstructing the audit investigation.
The taxpayers were considered to be obstructing the Australian Tax Office (ATO) when they didn’t give correct information to their tax agent, failed to attend meetings and refused to give information on the sale of their units.
The taxpayers’ plea that they did not have the funds available to make the payment at the time because their financier had imposed a condition upon them that all sale proceeds were to be paid direct to the bank only led the AAT to conclude that the non-disclosure was deliberate.
The AAT readily accepted that the penalty would crush the taxpayers but as errors had been discovered in other GST audits they deserved no leniency.
If you build a property with the intention of selling it for a profit then you are required to register for and charge GST on its sale.
Catching you is a no-brainer for the ATO; they get all the information they need from the Titles Office.