Sam Mohammad leads KPMG's Queensland indirect tax practice and has over 13 years' experience advising on indirect taxes. Sam specialises in providing practical an easy to understand GST and indirect tax advice on complex matters, with a particular focus on clients in the property and infrastructure sectors. Sam's client base includes ASX-listed property developers (both residential and commercial), mid-scale and boutique developers focusing on the south-east Queensland market and government and non-government entities involved in large-scale infrastructure projects across Queensland, New South Wales and Victoria (e.g., public private partnerships and development lease arrangements).
We had the pleasure of sitting down with Sam recently to discuss key challenges and opportunities facing the industry today.
You can find the full Q&A below.
Kindly tell us a little bit about yourself (experience, your company, expertise, etc)?
I’m a director in KPMG’s National Indirect Tax team and I lead its Queensland Indirect Tax practice. Since joining KPMG in 2004, I’ve provided GST and stamp duty advice and structuring assistance across a broad range of topics and industries, but I’ve tended to specialise in property and government (focused on their property-related issues), given the nature of the market and clients in south-east Queensland.
My property-based clients span the spectrum of “mum and dad investors”, valuers, contract builders through to sophisticated ASX-listed developers. I’ve assisted these clients in various ways, including:
- Australian Taxation Office (“ATO”) and Office of State Revenue (“OSR”) audits and reviews;
- mergers, restructures and acquisitions, including corporate reconstruction relief applications;
- managing stamp duty lodgements following an acquisition;
- successfully obtaining private binding rulings on uncertain matters and tax positions; and
- providing advice on complex arrangements such as development management agreements and development lease arrangements with government entities.
Some of the more notable matters I’ve recently been involved with include the current Queens Wharf casino and integrated resort development, the sale of the M7 AirportLink tollroad and the redevelopment of the Herston Quarter site. While these large-scale projects are obviously challenging in terms of the complexity of the issues, the quantum at stake, the sheer volume of documentation and the tight timeframes involved, they continue to prove that property is a challenging area from a GST and stamp duty perspective.
What are some of the challenges facing property developers when it comes to indirect tax?
Taking a broad view, perhaps the biggest challenge for property developers is in dealing with, or overcoming, the perceptions and reactions of the general public and regulators. For example, we’ve seen successive State Governments impose fairly onerous land tax and stamp duty surcharges on the sale of qualifying real property in response to the perception that foreign investors were (at least partly) responsible for the housing affordability crisis. In relation to GST, we’re imminently awaiting the Bill which will make purchasers of new residential properties responsible for remitting the GST to the ATO for sales made on and from 1 July 2018. This is a response to a perception that there are a sufficient number of operators of “phoenix companies” who fail to meet their GST obligations to warrant a new withholding regime across the entire residential property sector.
At a more specific level, property developers need to understand and comply with their GST obligations so as to not jeopardise the feasibility of their projects and to ensure they have the cash flow to meet these obligations. These obligations will obviously depend on the nature and scale of developments and the specifics of the arrangement itself, but would typically include issues surrounding the timing of attribution and quantum of GST, evidencing the use of any elections such as the margin scheme and going concern and allocating the risk of GST between the parties through any written agreements. Finally, given the heightened risk profile of property developers in the eyes of the ATO and the OSRs, all property developers need to be very mindful that it is a question of when and not if they will be audited for GST and to ensure they can fully support past GST positions taken.
What are the common mistakes accounting and legal practitioners usually make when they work in this area?
To steal a phrase from the ATO, it’s all about fact and degree and considering things on a case-by-case basis. It follows that the biggest mistake we see is practitioners assuming what was done last time will work next time. We see proforma property contracts and GST clauses that may have worked for an earlier client matter, but would create a GST issue for the current client. We also see GST positions that are based on assumptions of fact that don’t stack up on simple questioning, particularly around whether the margin scheme or going concern provisions can apply and even whether GST should apply to a transaction.
What are some of the big trends and developments you see ahead for the area?
With the advanced use of data analytics, the ATO and OSRs are getting smarter about reviews and audits and clients and their advisors need to be cognisant of this. Also, with the revenue authorities moving towards having “justified trust” in taxpayers, clients need to be ready for almost “real time” reviews. Quite often, the ATO knows when settlement of a property has occurred and is waiting to see the GST being remitted by a supplier in the next BAS. Failing to do so will obviously then trigger an audit.
Your topics focuses on ‘Minimising GST Complexity in Property Developments and the Blunders that can Blow Cash Flow, why is it important for practitioners to attend your session?
Like any business, conducting a property development enterprise is all about cash flow management. It’s not much good having a greenfield site that will make millions in profit in 5 years’ time, if you can’t pay your employees today. As a trusted business advisor, practitioners need to be cognisant of managing their client’s tax obligations as GST quite often represents one of the biggest expenses after land acquisition and salaries / build costs.
Further, most property developers aren’t running a charity, so there’s no reason to pay the ATO more than you’re legally required to do. Ensuring an optimal and defensible GST position is key to this.
What do you see as some of the key takeaways and benefits for practitioners from attending your session?
I intend to highlight some of the key risks and challenges relating to determining whether a client is carrying on a property development enterprise and the GST implications that flow from that. I’m hopeful that the case studies, drawn from real-life examples, will facilitate questions and discussions to help address some of the complexities in a meaningful and tangible way.
You can hear more from Sam at the Inaugural Property Tax Conference seminar, being held on Tuesday 06 March at the Mercure Hotel Brisbane, Brisbane.