You have signed a contract to sell a commercial property or a newly built home, and your accountant mentions GST. For many Queensland sellers, that moment comes as a surprise. The assumption that property sales are GST-free is one of the most common misunderstandings in Queensland conveyancing.
Whether GST applies to a property sale depends on what is being sold, who the seller is, and how the property has been used. The sale of an existing residential home is generally input taxed, meaning no GST is owed by the seller, according to the Australian Taxation Office. But the sale of new residential premises, commercial property and certain vacant land can be a different matter entirely.
As a Springfield law firm, we help clients across Greater Springfield and Ipswich with the legal side of property transactions, including reviewing contracts where GST or the margin scheme is in play.
Here is what GST on property generally means in Queensland, and where the margin scheme fits in.
Key takeaways
- Selling an existing residential home is generally not subject to GST.
- New residential premises and commercial property can attract GST on sale.
- The margin scheme can reduce the GST payable where the seller is eligible.
This article is general information only and is not legal advice. Every situation is different, and you should speak with a solicitor about your own circumstances.
When does GST apply to a Queensland property sale?
GST applies to a property sale where the sale is a taxable supply, meaning the seller is registered or required to be registered for GST and the property is not input taxed, according to the Australian Taxation Office. The sale of existing residential premises is input taxed, so the seller does not owe GST on it. That covers the great majority of Queensland home sales between private individuals.
New residential premises sit in a different category. A property is new if it has not been previously occupied or sold as a place of residence. A substantially renovated home can also be treated as new premises. Where a GST-registered seller sells new residential premises or commercial property, GST is generally owed on the sale price.
Vacant land intended for residential use can also be a taxable supply in the hands of a developer or GST-registered seller. The Australian Taxation Office's guidance draws a clear line between a private individual selling their own home and a registered entity selling property as part of a business activity.
"The sale of an existing residential home is generally input taxed, meaning the seller does not owe GST on it. But for new homes, commercial property and some vacant land, the position can be quite different."
Jade Kickbusch, Principal, Brookwater Legal
What is the GST going concern exemption?
A sale of a going concern is GST-free under certain conditions, according to the Australian Taxation Office. All of those conditions must be met for the exemption to apply. The business being sold must be capable of being carried on without interruption. The seller must supply everything necessary for the buyer to continue running it. And the buyer must be registered or required to be registered for GST.
Crucially, buyer and seller must agree in writing that the sale is of a going concern, and that agreement must be in place before settlement. A contract that does not include that wording cannot be treated as a GST-free going concern after the fact.
This matters in Queensland property transactions involving commercial premises where a tenant is in place and the lease transfers with the building. Whether the going concern rules apply in a given situation is an accounting question, and a tax adviser should confirm the position before the contract is finalised.
What are the key GST rules sellers need to know in Queensland?
The rules that most often affect Queensland property sellers include:
- › Input taxed residential sales: the sale of existing residential premises by a private individual is generally input taxed and attracts no GST, according to the Australian Taxation Office.
- › New residential premises: GST is generally owed by the seller if the premises are new and the seller is GST-registered. A substantially renovated home may also be treated as new, according to the Australian Taxation Office.
- › Commercial property: a GST-registered seller of commercial premises is generally liable for GST on the sale price, according to the Australian Taxation Office.
- › Going concern: a sale of a business as a going concern can be GST-free, but only where the written agreement and all other conditions are met, according to the Australian Taxation Office.
- › What the contract must say: sale contracts should state whether the price includes GST and whether the margin scheme applies, according to the Australian Taxation Office.
How does a solicitor help with GST and the margin scheme in Queensland?
The legal side of a property transaction where GST or the margin scheme is involved requires careful contract review. A solicitor checks that the contract correctly states whether GST is included in the price, whether the margin scheme will apply, and whether the going concern provisions are properly drafted. Getting those terms wrong creates financial and legal risk for both buyer and seller.
A solicitor also coordinates with the GST withholding obligations at settlement. Where GST applies to the sale of new residential premises or certain vacant land, the buyer is generally required to withhold an amount from the purchase price and pay it directly to the Australian Taxation Office at settlement, according to the Australian Taxation Office. The contract must notify the buyer whether a withholding obligation applies, and the solicitor handles the lodgement steps through the electronic settlement platform.
Our conveyancing team can review contracts for commercial property, new residential premises and development land across Greater Springfield and Ipswich, and work alongside your accountant to make sure the legal documents reflect the correct GST position.
| Get in touch Need help with a commercial property or new home contract? We're an experienced team who keep you well informed at every stage of the process. Get in touch to discuss your needs. |
What is the margin scheme and when can it be used?
The margin scheme is a way of calculating GST on a property sale that can significantly reduce the amount payable, according to the Australian Taxation Office. Instead of calculating GST as one eleventh of the full sale price, the GST is calculated on the margin, which is generally the sale price less the amount the seller paid for the property, or an approved valuation.
The margin scheme can only be used where the sale is taxable and the seller is eligible. A seller cannot use the margin scheme where they purchased the property as a fully taxable supply and the margin scheme was not used at that time. Eligibility is a question for the seller and their tax adviser, not the buyer.
Where the margin scheme applies, the GST is generally seven percent of the margin rather than one eleventh of the full price, according to the Australian Taxation Office. The buyer and seller must have a written agreement to use the margin scheme, and that agreement must be in place before settlement. A buyer whose purchase is subject to the margin scheme generally cannot claim a GST credit on the purchase.
What do sellers and buyers need to know about GST withholding at settlement?
From 1 July 2018, a GST withholding regime requires buyers of new residential premises or potential residential land from a GST-registered seller to pay a portion of the purchase price directly to the Australian Taxation Office at settlement, rather than to the seller, according to the Australian Taxation Office. The seller must notify the buyer in writing, either in the contract or by a separate notice given before settlement, whether a withholding obligation applies.
Where the general GST rate applies, the amount withheld is generally one eleventh of the contract price. Where the margin scheme applies, it is generally seven percent of the contract price, according to the Australian Taxation Office.
The buyer's practical steps include:
- › Lodging a withholding notification: filed after the contract is signed, according to the Australian Taxation Office.
- › Confirming the settlement date: a second form lodged around the time of settlement, according to the Australian Taxation Office.
- › Paying the withheld amount: paid directly to the Australian Taxation Office at settlement, with the balance going to the seller.
A solicitor or conveyancer can lodge the forms on the buyer's behalf under a signed authority, including through the electronic settlement platform, according to the Australian Taxation Office. The buyer is not required to register for GST to meet the withholding obligation.
What do the GST rules not cover in a Queensland property context?
Several situations fall outside the scope of what a property contract or a solicitor alone can resolve, and understanding the limits matters before signing.
The GST rules do not determine whether a seller is required to be registered for GST. That question turns on the nature and scale of the seller's enterprise and is answered by the seller's accountant or tax adviser, not the contract.
The rules also do not set how the margin is calculated in every case. Where the seller purchased the land before GST began in July 2000, or acquired it through a transaction where the margin scheme was not used, an approved valuation may be used instead of the purchase price to calculate the margin. The Australian Taxation Office sets out the valuation rules, and a registered valuer and an accountant typically work through the calculation together.
Finally, the going concern exemption does not apply automatically to a sale of tenanted commercial premises. The lease passing to the buyer on a commercial property sale does not, on its own, make the transaction a going concern. All conditions, including the written agreement, must be satisfied before settlement. Whether they are is a matter for the accountant and, in some cases, the Australian Taxation Office to confirm.
Frequently Asked Questions
Does GST apply to selling an existing home in Queensland?
Generally no. The Australian Taxation Office treats the sale of existing residential premises as input taxed, which means the seller does not owe GST. This covers most private home sales in Queensland.
When does GST apply to selling a new home in Queensland?
Where the seller is registered or required to be registered for GST and the premises have not previously been occupied or sold as a residence, the sale is generally taxable, according to the Australian Taxation Office. A substantially renovated home may also be treated as new premises.
What is the margin scheme on a property sale in Queensland?
The margin scheme is a way of calculating GST on a taxable property sale that uses the margin between the sale price and what the seller paid, rather than the full price, according to the Australian Taxation Office. Buyer and seller must agree in writing before settlement to use it.
Does the going concern exemption apply automatically to a leased commercial property in Queensland?
No. A lease passing to the buyer does not by itself make the sale GST-free, according to the Australian Taxation Office. All conditions must be met, including a written agreement between buyer and seller that the sale is of a going concern, before settlement.
What does the GST withholding obligation mean for buyers in Queensland?
Where a withholding obligation applies, the buyer pays a portion of the price directly to the Australian Taxation Office at settlement rather than to the seller. The seller must notify the buyer in writing before settlement whether the obligation applies.
Do you need a solicitor to review a contract involving GST or the margin scheme in Springfield or Ipswich QLD?
Legal review is important where a contract involves new residential premises, commercial property or the margin scheme, because the contract terms must correctly reflect the agreed GST position before settlement. A solicitor works alongside the client's accountant on the legal documentation.
Can a buyer claim a GST credit on a purchase where the margin scheme applies in Queensland?
Generally no. According to the Australian Taxation Office, a buyer whose purchase is subject to the margin scheme cannot claim a GST credit on that purchase. Tax advice from an accountant can confirm the position for a specific transaction.
Your Next Steps
GST on property is an area where the consequences of getting the contract terms wrong are significant for both buyer and seller, whether the transaction involves a new home in Ipswich, commercial premises in Greater Springfield or development land elsewhere in Queensland. Addressing the GST position before the contract is signed avoids disputes at settlement and potential liability after it.
If a commercial property, new home or development site is on your mind, the next step is a straightforward one. Get in touch with the Brookwater Legal team or call (07) 3437 8555, and we'll talk you through how the process generally works.
 |
External Resources
- Australian Taxation Office - GST and property
- Australian Taxation Office - Calculating the GST payable (margin scheme)
- Australian Taxation Office - Eligibility to use the margin scheme
- Australian Taxation Office - GST at settlement: a guide for purchasers and their representatives
- Australian Taxation Office - Selling commercial premises
Brookwater Legal · This article contains general information only and does not constitute legal advice. It does not take into account your individual circumstances. You should obtain legal advice about your own situation before acting on anything in this article. Liability limited by a scheme approved under Professional Standards Legislation.
