How GST Applies to Property Sales in Australia
How it works
GST on property is one of the most complex areas of Australian tax. Whether a property sale attracts GST depends on three things: what type of property it is, who is selling it, and how the seller acquired it. The sale of new residential premises (including substantially renovated homes and new strata units) by a GST-registered developer is taxable. The sale of existing residential premises (a lived-in house being sold by the owner) is input-taxed — no GST applies. Commercial property sold by a GST-registered entity is generally taxable.
When GST does apply, there are two calculation methods. The standard method calculates GST as 1/11th of the full sale price — so on a $1.1 million sale, the GST is $100,000. The margin scheme calculates GST as 1/11th of the margin (sale price minus original purchase price) — so if the property was originally purchased for $700,000 and sold for $1.1 million, GST is 1/11th of $400,000 = $36,364. The margin scheme can save hundreds of thousands of dollars, but both buyer and seller must agree in writing to use it before settlement.
Since 1 July 2018, purchasers of new residential premises and new residential land must withhold the GST from the purchase price and pay it directly to the ATO at settlement. This applies even if the margin scheme is used. The purchaser lodges a Form 1 with the ATO, and the vendor receives the sale price minus the withheld amount. This rule was introduced to prevent developers from collecting GST and not remitting it.
When to use this calculator
- You're a developer selling new residential premises and want to compare your GST liability under the standard method vs the margin scheme
- You're buying off-the-plan or a new home and want to understand the GST component built into the price and the purchaser withholding obligation
- You're selling commercial property and need to calculate the GST or check if the sale qualifies as a GST-free going concern
- You're selling vacant land and need to determine if GST applies based on how you acquired the land and whether you're GST-registered
- You want to check whether the margin scheme is available for your property sale based on how the property was originally acquired
Key concepts
- Standard method
- GST is calculated as 1/11th of the total sale price. On a $990,000 sale, the GST is $90,000 and the GST-exclusive price is $900,000. This is the default method and must be used when the margin scheme is not available (e.g., when the seller claimed GST credits on the original purchase).
- Margin scheme
- GST is calculated as 1/11th of the margin (sale price minus original purchase price). The margin scheme is only available when the property was acquired before 1 July 2000, the previous sale was not taxable, or the seller did not claim GST credits on acquisition. Both parties must agree in writing before settlement. On a property bought for $600,000 and sold for $990,000, the margin is $390,000 and GST is $35,455 — saving $54,545 compared to the standard method.
- Purchaser withholding
- Since July 2018, buyers of new residential premises and new residential land must withhold the GST amount from the purchase price and pay it directly to the ATO. Under the standard method, the withholding is 1/11th of the price. Under the margin scheme, the withholding is 7% of the price (a proxy since the buyer usually doesn't know the margin). The vendor receives the sale price minus the withheld amount.
- Going concern exemption
- The sale of a business (or commercial property leased as part of a business) as a going concern is GST-free if: both parties are GST-registered, the written agreement states the sale is a going concern, and the supply includes everything needed for the buyer to continue operating without interruption. This is commonly used for tenanted commercial properties and operating businesses.
Worked example — Developer selling a new townhouse for $880,000
A developer is selling a newly built townhouse for $880,000 (inc-GST). They originally purchased the land for $350,000 in 2019 and did not claim GST credits on that purchase, so the margin scheme is available. The buyer is not GST-registered.
Standard method:
| Detail | Amount |
|---|---|
| Sale price (inc-GST) | $880,000 |
| GST (1/11th of price) | $80,000 |
| GST-exclusive price | $800,000 |
| Purchaser withholds (1/11th) | $80,000 |
| Vendor receives at settlement | $800,000 |
Margin scheme:
| Detail | Amount |
|---|---|
| Sale price | $880,000 |
| Original purchase price | $350,000 |
| Margin | $530,000 |
| GST (1/11th of margin) | $48,182 |
| Purchaser withholds (7% of price) | $61,600 |
| Vendor receives at settlement | $818,400 |
Comparison:
| Method | GST payable | Vendor receives | Saving |
|---|---|---|---|
| Standard | $80,000 | $800,000 | — |
| Margin scheme | $48,182 | $818,400* | $31,818 |
*Under the margin scheme, the purchaser withholds 7% ($61,600) as a proxy. The developer's actual GST liability is $48,182, so they receive the $13,418 difference back from the ATO after lodging their BAS. The margin scheme saves the developer $31,818 in GST on this single sale.