Why is GST, Stamp Duty and Tax important?
There are a variety of State and Federal government taxes that apply to the ongoing operation of a Management Rights business, and the purchase and sale of a Management Rights business.
When selling an existing Management Rights business, the sale would ordinarily be subject to GST. However, provided the business is sold as a going concern (i.e. the business is continuously operated right up until settlement and everything needed to operate the business is transferred at settlement) the sale is exempt from GST. When selling a Management Rights business the seller may be subject to capital gains tax.
When purchasing an “off the plan” Management Rights business, the sale is subject to GST as the business is not a going concern prior to settlement.
When purchasing an existing Management Rights business in Queensland, the total purchase price of the business and land being purchased is subject to stamp duty, which is paid on or just prior to settlement. In New South Wales, stamp duty is only payable on the value of the land and the business equipment, and is payable within 90 days of the contracts being signed or on the settlement date, whichever is sooner. There is no stamp duty for an “off the plan” business.
While operating a Management Rights business the manager will generally need to charge GST on all the services they provide. In most circumstances however, the manager does not need to charge GST on the rent for lots in their letting pool.
Understanding the various taxes for a Management Rights business and how they apply to you is very important. Making sure you have the right structure for your circumstances and that you operate with the correct business practices can have a significant impact on the taxes you will need to pay.
The Management Rights team at Small Myers Hughes are experts in the structures and business practices required for Management Rights businesses, as they work closely with the Small Myers Hughes specialist and accredited Tax team and leading Management Rights industry accountants. Our team can work hand in hand with your accountant to ensure the best outcome for you.