Blog

Welcome to our blog page © Real Estate Excellence

Government turns GST on its head for new property sales

Sourced article

Government turns GST on its head for new property sales

Steve Healy Jon Denovan Cameron Steele
 
Australia May 12 2017

The Budget measures include a radical plan to shift the responsibility of accounting for GST from property developers to purchasers. Under the proposal, purchasers must remit the GST directly to the Australian Taxation Office (ATO) as part of the settlement process.

The proposal will apply to newly constructed residential properties and new subdivisions from 1 July 2018.

What does this mean for the developers?

The full impact fordevelopers will depend on the final form of the legislation. The critical question is whether the purchaser’s liability will be interim or final.

If the purchaser’s liability to account for GST is non-final, the purchaser may be required to collect a notional amount and a true-up may then occur when the property developer submits its business activity statement (BAS). This may present cash-flow and funding issues for developers, particularly if the GST amount remitted by the purchaser is significantly more than the developer’s actual GST liability.

Not all business is good business

We spend so much time at work, we spend so much money in business and we all know life is short.

A senior property manager recently told me about a prospective new client landlord who was belligerent and difficult to deal with from the get go. She wisely advised it would be best to go to another agency as I cannot see us having a successful business relationship. This has got me to thinking… hence this blog.

The adage ‘not all business is good business’ is by far not new; however, in this ever-increasing competitive business world, many of us are almost desperate for new business. I make this generalised statement based on the ‘drum’ that constantly gets beaten “grow the rent roll’. Whilst I agree wholeheartedly that every day businesses should be looking for new business opportunities (as I do in my own business), I do ask in the world of property management, at what cost is this being done?

There has long been a concern for staff in the property management industry and retention of staff. The costs of recruitment are substantial for most business plus the cost whilst waiting for the ‘right person’ to come along. It is interesting in my privileged position to note a trend in portfolio management of decreasing portfolio sizes; 5 years ago, it was common in my view for property managers to manage from 180 to 220 properties, however this trend seems to be on the demise. Lesser numbers seem to be on the increase which I believe to a wise decision. As more and more statutory demands are placed on landlords, property managers have more legislative obligations to manage. All service industry has long had issues with poor customers; property management also has its fair share. Abuse and unacceptable behaviour not just from tenants but also from landlord clients.

It must be said that most landlords and tenants are good people however we all know there is always someone or some people who are outright unreasonable, demanding and difficult to deal with. This could be they have had a ‘bad day’ and take it out on others; more so, the experiences of many are a history of this poor and unacceptable behaviour.

Given the issues that are far from new are staff recruitment, retention, stress and burn out in the real estate industry, it was refreshing to listen to the senior property manager decide that the business of the landlord was not wanted.

I believe the role of a career property manager/tenancy manager is three-fold in general;

  • Income retention (look after what we have)
  • Income growth (new business)
  • Income producing (activities that produce income).

We may want to grow our businesses but not to the detriment of our staff and their mental health plus their job satisfaction (from a business perspective this could lead to business cost). Think of all the time we would have to service our existing clients and seek excellent new clients if we say ‘enough is enough’ to the clients that are costing us money, and sometimes costing businesses more than money.