Is it worth starting a company when doing renos in order to claim back GST?
Am looking at doing 40k renovation work and had heard running it thru a company means GST can be claimed back, sounds worth it when the bills will be sizeable.
Anyone had experience with this?
macman26,
Aug 29, 7:58am
The company can claim their GST back but any work they do they need to charge GST and pass it on to IRD. May be marginal savings.
jmma,
Aug 29, 9:20am
Can just register for GST as a sole trader, don't need to be a company.
johotech,
Aug 29, 8:47pm
You only register for GST if you carry out a taxable activity. Just renovating your own house isn't. And you can't just register for GST, claim back the GST, then cancel GST registration. If you cancel your registration, you have to pay GST on the current market value of any assets. Assets being all the stuff you bought and claimed GST, but haven't sold and remitted the GST on the sale price.
If you are buying the house to renovate and sell again, you could have claimed the GST on the purchase price as well. So on a $600k house, you could have got $78k back in GST. But when you sell the house, you have to pay GST on the sale price. So if you sell for $800k, you have to pay back $104k - so you've just paid $26k of GST on the profit you made. Of course there's expenses to take off the profit, and GST you claim on those expenses - but you'll still end up paying GST on any profit. You generally aren't "adding" GST onto any sale price, it's almost always GST inclusive.
Without knowing your plans, it's not possible to give a more accurate answer.
tegretol,
Aug 29, 9:08pm
The purpse of operating as a limited company is to isolate yourself from commercial risk - if you plan to behave and do everything within the law and building act then no point - just stay as sole trader.
The purpose of registering for gst is that you have to if you exceed the threshold ($65k I think) of turnover. It has absolutely no other purpose or value to you unless you feel that acting as a tax collector is fun.
sooby,
Aug 30, 7:45am
Ok thanks,
So not really worth starting a sole trader or company purely for one renovation. Thought it sounded too good to be true
Cheers guys
tegretol,
Aug 30, 9:06am
Is it your own main residence?
daz59,
Aug 30, 9:58pm
Its called tax evasion and IRD will come down heavy on you if they find out.
ceebee2,
Aug 31, 12:46am
But do setup up a discount option with whoever you are buying most of the big ticket items from.
colin433,
Sep 1, 7:17pm
and after making a public request for advice, they could soon suss out who the poster is.
elect70,
Sep 29, 6:54pm
Ok register for GST claim all the GST back on the renovation & give youself an invoice for the work at a big discount . Let us know when IRD get hold of you . Its an old scheme & they a awake to it
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