Hi,
I am auditing a fund that holds primary production land with a residential house on the land for the 2022 year. The land satisfies the business real property test, a primary production business is being operated & the predominant use is primary production. The trustees have completed a major renovation on the farmhouse during the 2022 year and have claimed the GST on the renovation costs. $407,000 renovation, GST claimed was $37,000. Does the businses real property test supersede the GST Act? If the trustees have overclaimed the GST, and they go back and amend the BASs and show the liability on the statement of financial position, no breach?
Hi Lacey
My view is that overclaiming GST would not be a breach of the SIS legislation.
If a GST refund has been overclaimed and taken up as a liability (& later repaid to the ATO) you would have no further audit issue.
If the GST was overclaimed and a liability not taken up in the accounts you should raise a Part A financial qualification assuming the liability is material.
The GST legislation is separate legislation to the SIS legislation. The GST legislation determines what GST is payable / refundable.
Have the trustees received tax advice as to whether or not the GST can be claimed on the farmhouse renovation? If other members have a view on the ability to claim GST in this example please let the forum know.
Thanks
THE AUDITORS INSTITUTE