Common GST errors and property

Can you claim GST credits when you purchase property?

Often GST credits are claimed incorrectly on common property transactions.

Generally, under a standard land contract, you can claim a GST credit if you purchase property or land for use in your enterprise (if GST was included in the sale price and the margin scheme was not used). Regardless of whether you account for GST on a cash basis or non-cash basis, you can claim this credit on the activity statement for the tax period when settlement occurs.

You cannot claim GST credits when you:

• are not registered (or required to be registered) for GST at the time of purchase
• have only paid for the deposit under a standard land contract
• purchase residential property
• purchase a property as a private sale
• purchase new residential property for rental purposes
• purchase the property as part of a GST-free supply of a going concern
• purchase the property or land under the margin scheme, there must be an agreement in writing that the margin scheme is being used
• have purchased a residential premise, such as a room, unit or an apartment which you lease to a business that then supplies it as hotel accommodation with other facilities.

If you are entitled to claim GST credits, you must hold a valid tax invoice issued by the seller when you lodge your activity statement. You cannot use a settlement statement or a contract of sale in place of a tax invoice to claim GST credits.

There is a four-year time limit in claiming GST credits. For more information, refer to Time limits on GST refunds (NAT 11645).