In Australia, the treatment of GST (Goods and Services Tax) in a Build-to-Rent (BTR) development is unique due to the nature of the project. Here’s how GST is generally treated in such developments:
1. GST on Construction Costs
- GST is charged on the construction costs and other development expenses. This includes materials, labor, and professional services (architectural, engineering, etc.).
- As the developer is usually registered for GST, they can claim input tax credits on these costs, meaning the GST paid on construction and development expenses can be reclaimed.
2. GST on Rental Income
- No GST is charged on rental income in Build-to-Rent developments. Residential rental income is considered an input-taxed supply under Australian GST law. This means that developers cannot charge GST on the rent, and therefore, cannot claim input tax credits related to the construction of the rental properties that generate this income.
3. GST on Property Sales (If Applicable)
- In cases where part of the BTR development involves selling units (i.e., mixed or hybrid projects where some units are sold and some are rented), GST may apply to the sale of the properties. This would be under the margin scheme or on the full sale price, depending on how the development is structured.
- The developer can generally claim input tax credits on the costs related to the construction of the units that are sold, as sales of new residential properties are considered taxable supplies.
4. GST on Operational Costs
- For operational expenses (e.g., property management, maintenance), the developer will be charged GST. However, since the rental income is input-taxed, the developer cannot claim GST credits on those operational expenses that are directly related to the rental activities.
5. Mixed-Use Developments
- In a hybrid or mixed-use development (e.g., where some units are held for rent and others are sold), GST treatment will vary between the rental and sales components.
- For the rental portion, input tax credits on construction costs are generally not claimable (since the rental income is input-taxed).
- For the sales portion, input tax credits on construction costs are claimable (since the sale of the new residential units is subject to GST).
This mixed nature may require apportionment of GST credits, which can be complex and needs to be handled carefully to ensure compliance with the GST rules in Australia.
Learn How Lead Developer+ handles this in our Build-To-Rent Property Development Feasibility.