Does bank give home loan on property price plus GST?

superm86 on 19/12/2019 - 08:00
Last edited 19/12/2019 - 11:08

Hi all, I searched online but couldn't find the answer so I thought I will put this to ozbargain community.

So if a property has plus gst on contract of sale which means basically whatever amount you put the offer for, you have to pay gst on top of it.

So my question is that would bank provide loan on base price or price plus gst?

Some link to get on property: https://www.ato.gov.au/Business/GST/In-detail/Your-industry/…

Thanks for the insights - I checked with the bank, they dont pay loan on GST component as that goes to Govt and not part of the sale price.

Poll Options

  • 2
    Bank give loan on base price only
  • 5
    Bank give loan on base plus gst price
Financial

Comments

  • brendanm on 19/12/2019 - 08:01
    -5

    You don't pay gst on a house.

    • dasher86 on 19/12/2019 - 08:09

      What about a unit?

    • superm86 on 19/12/2019 - 08:13

      There are houses that are sold by businesses, which can have a plus gst condition. I think this may be a new thing

    • Ugly on 19/12/2019 - 08:14
      +2

      You don't pay GST on an existing house. GST may be payable for a new house, but is payable by the sellers. Your bank loan would be based on the total purchase price, which would include any GST applied by the seller.

      https://www.ato.gov.au/Business/GST/When-to-charge-GST-(and-when-not-to)/Input-taxed-sales/Residential-premises/

      • superm86 on 19/12/2019 - 08:18
        +2

        If the contract of sales has a 'plus gst' on it then buyer has to pay the gst component over and above the sale price.

        I have seen this happen on land being sold by business and property being sold by banks (defaulted property)

        https://www.ato.gov.au/Business/GST/In-detail/Your-industry/…

        • JimmyF on 19/12/2019 - 08:29
          +1

          commercial property can have GST attached to it, Residential not so for personal use to live in.

          • Typical16-bitEnjoyer on 19/12/2019 - 10:07
            +1

            @JimmyF:

            Residential not so for personal use to live in.

            Incorrect.

            If it's a new residential property, or substantially new/renovated, then GST applies. Doesn't matter whether the purchaser plans on "personal use to live in".

  • Skramit on 19/12/2019 - 08:08
    -2

    You don't pay gst on a house.

    • dasher86 on 19/12/2019 - 08:10

      What about a unit?

      • Skramit on 19/12/2019 - 08:11

        Some units have GST. Is it brand new?

  • [Deactivated] on 19/12/2019 - 08:22
    +3

    GST can apply to investment properties sold by professionals. A female seller, Simone Semmons, recently went to jail for deliberately ignoring it.

  • whooah1979 on 19/12/2019 - 08:45
    -2

    The buyer may be required to pay GST on a residential property if the vendor is registered for GST.

    • Typical16-bitEnjoyer on 19/12/2019 - 10:05

      Incorrect. Vendor doesn't have to be registered for GST prior sale or at the time of settlement. They have 21 days post settlement to register if applicable. Never rely on their GST registration for anything.

  • saintpotter on 19/12/2019 - 09:00
    -2

    You don't pay gst on a house.

  • AbsX on 19/12/2019 - 09:25
    +1

    I think the banks might be a bit more knowledgeable on this issue than the average Joe on ozbargain

    • Archi on 19/12/2019 - 09:42

      not all average joe's are on ozbargain, and like wise not everyone on ozbargain is an average joe.

      • pjetson on 19/12/2019 - 09:59
        +2

        The problem is telling which joe is average and which is not.

        • AbsX on 19/12/2019 - 10:42
          +1

          If you can figure this out, then you are guaranteed to be successful in your life endeavours

  • djkelly69 on 19/12/2019 - 09:31
    +3

    Banks lend based on their valuation of the property, not the contract price. The valuer will likely 'consider' the contract price when making his/her valuation, so if it is a plus GST contract, make sure they know that.

  • spal on 19/12/2019 - 09:54
    +1

    GST is payable on new residential property. In simple words, New residential property means a property which has not previously been sold, or has been used as a residential property for less than 5 years.

    So, generally it is correct that people don't pay GST on residential property, unless it is a new residential property. It does not matter the business structure of the vendor. If it is new GST is payable, even if it was primary residence of the Vendor.

    Regarding loan, What djkelly69 said is my experience. Banks lend based on property valuation subject usually to the maximum of the contract price. If the contract price requires GST to be paid, that is the value they will assess the loan application to. It is a good idea to point out to the bank the total contract price will require GST to be paid.

    • Typical16-bitEnjoyer on 19/12/2019 - 10:03
      +1

      This.

      Lots of keen "The Block" watching renovators get caught out each year.

    • superm86 on 19/12/2019 - 11:10

      There can be gst on old property. I have seen it on contract of sale.

      • spal on 21/12/2019 - 07:44

        No GST is payable on old residential property. What you would have seen would be commercial property, commercial lease or sale of property with business on it, and don’t even want to talk about going concern sales.

        It is difficult to explain complex tax matters in forum. There is lot of information too. It just adds to the confusion. I would suggest limit yourself to your circumstances, do research and speak to a professional.

  • Typical16-bitEnjoyer on 19/12/2019 - 10:00

    OP, is it margin scheme? Different scenario if that applies.

    If not, just get the vendor to rejig the contract as total price inc. GST so the box "plus GST" doesn't need to be ticked. No difference to the bank then - and "protects" you from any GST issues that may arise later. If something pops up, the Vendor is on the hook for any GST or additional GST. Not you.

    • superm86 on 19/12/2019 - 11:10

      not margin scheme.

      • Typical16-bitEnjoyer on 19/12/2019 - 13:14

        Ask them to redraft the contract as GST inclusive without the plus GST box ticked.

        If they refuse, ask them (or better yet get your solicitors) why they would refuse to.

  • tsunamisurfer on 19/12/2019 - 11:46

    Whether GST is applicable to the sale of OP's property does not impact him when dealing with his lender.

    He is going to quote the purchase price, that's all.

  • HeWhoKnows on 20/12/2019 - 07:31
    +1

    BOTH answers are WRONG

    The bank conducts its own valuation and provides a loan up to 80% of that valuation. Past the 80% you must pay Mortgage Insurance.

    The banks Valuation is based on the price the bank would get if it had to sell the property within 30 days or so.

    See here: https://binvested.com.au/how-do-banks-value-a-property/

  • demeter on 20/12/2019 - 09:21
    -1

    https://www.ato.gov.au/business/gst/when-to-charge-gst-(and-when-not-to)/input-taxed-sales/financial-supplies/

    GST does not apply to financial supplies. No GST on mortgage.

    GST only applies to property purchases as part of a business.
    Buying an investment property is considered an investment and not a business (if you are buying as an individual person).
    If you had a business that purchased and sold property, that is a business action and thus then GST would apply. The purchaser would pay the GST to the ATO and not to the person selling.

  • OzHunterNSW on 20/12/2019 - 10:41
    +1

    You can ring the bank, I think it's called a phone, so fandango contraption but I call it he devil speaker, each to their own… but yes, you could ring the bank

  • spal on 21/12/2019 - 07:55
    +1

    Why has this become a GST issue? Question was about banks lending to include GST. This has now been answered. Banks will lend as per their valuation criterion. Banks valuations in at arms length transactions usually will never exceed the contract price. The valuer actually will get a copy of the contract as well. They go through the contract to see a conditions which may adversely affect the valuation.
    Now OP should ask these questions to the lender. I hope there is subject to finance clause in the contract.

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