GST for Real Estate & Property
Property is one of the most complex areas of GST in Australia. The treatment depends on what type of property it is (residential vs commercial), whether it is 'new', how you acquired it, and whether you use the margin scheme or the going concern exemption. Mistakes in property GST can cost tens of thousands of dollars.
Overview
The fundamental distinction in property GST is between residential and commercial. Existing residential premises are input-taxed — no GST is charged on the sale or on rent, but the landlord or seller cannot claim GST credits on related expenses. Commercial property is fully taxable — GST applies to sales and leases, and the owner can claim full input tax credits.
New residential premises are an exception to the input-taxed rule. If premises are 'new' — never previously sold as residential, created through substantial renovation, or built to replace a demolished building — the first sale is a taxable supply and GST applies. The seller must charge GST (unless the margin scheme applies, in which case GST is calculated on the margin). Premises lose their 'new' status after five continuous years of residential rent.
The margin scheme allows property sellers to pay GST on the margin (sale price minus original purchase price) rather than 1/11th of the full sale price. Both parties must agree in writing before settlement. Not all properties are eligible — it depends on how the seller acquired the property and whether the previous owner was eligible to use the margin scheme.
The going concern exemption makes a property sale GST-free if the property is sold as part of a going concern — meaning all things necessary for the continued operation of the enterprise are supplied, the buyer is GST-registered, and both parties agree in writing that the sale is of a going concern. This is commonly used for commercial properties with existing tenants, and for sales of business properties where the lease and tenant relationships are transferred.
Common items & GST status
The table below shows the GST treatment of common items and transactions in the real estate & property sector.
| Item | GST Status | Notes |
|---|---|---|
| Sale of existing residential property | Input-taxed | No GST charged; seller cannot claim input credits on sale costs |
| Sale of new residential premises | Taxable | GST on full price or margin — buyer withholds at settlement |
| Sale of commercial property | Taxable | Standard GST unless going concern exemption applies |
| Sale of commercial property (going concern) | GST-free | GST-free if all going concern conditions are met |
| Residential rent | Input-taxed | No GST on residential rent; no input credits for landlord |
| Commercial rent | Taxable | Landlord charges GST — tenant claims input credit |
| Commercial residential premises (hotels, motels) | Taxable | Short-term accommodation in commercial residential premises is taxable |
| Real estate agent commission (residential sale) | Taxable | Agent's fee includes GST — but vendor may not be able to claim credit (input-taxed sale) |
| Real estate agent commission (commercial sale) | Taxable | Agent's fee includes GST — vendor claims input credit |
| Property management fees | Taxable | Property management is a taxable service |
| Vacant land (sold by business) | Taxable | Taxable if sold in the course of an enterprise |
| Strata title levies | GST-free | Body corporate levies from unit owners are generally not subject to GST |
Common mistakes & traps
These are the most frequent GST errors the ATO sees in the real estate & property industry. Avoiding them can save your business from penalties and back-payments.
1Claiming GST credits on residential rental expenses
Residential rent is input-taxed. You cannot claim GST credits on costs related to a residential rental property — including agent commissions, repairs, maintenance, insurance, and advertising for tenants.
How to fix it
Only claim GST credits on expenses related to taxable supplies. If you own both commercial (taxable) and residential (input-taxed) properties, keep expenses separate and only claim credits on the commercial property expenses.
2Forgetting GST at settlement withholding obligations
Since 1 July 2018, buyers of new residential premises or potential residential land must withhold GST and pay it directly to the ATO at settlement. The vendor must provide the buyer with a notification of the withholding amount.
How to fix it
If you are selling new residential premises, notify the buyer of the GST withholding obligation and the amount (1/11th of the contract price, or 7% if using the margin scheme). The buyer's solicitor or conveyancer handles the withholding and ATO lodgment.
3Not agreeing to the margin scheme in writing before settlement
The margin scheme requires a written agreement between buyer and seller before settlement. If the agreement is not in place before the supply occurs, the margin scheme cannot be used retrospectively.
How to fix it
Include a margin scheme clause in the contract of sale. The clause must explicitly state that both parties agree to use the margin scheme under Division 75 of the GST Act. Get this documented early — it cannot be done after settlement.
4Assuming all property sales by individuals are GST-free
If you are carrying on a property development enterprise (even as an individual), you are in the GST system. Selling a property you developed or substantially renovated as part of a business triggers GST — you cannot simply avoid it because you are not a company.
How to fix it
If you develop, build, or substantially renovate property with the intention of selling at a profit, you are likely carrying on an enterprise. Seek advice on whether you need to register for GST and what your obligations are on the sale.
5Not meeting all going concern conditions
The going concern exemption requires five conditions to be met: the supply is for payment, the buyer is GST-registered, both parties agree in writing, all things necessary for continued operation are supplied, and the seller carries on the business until settlement. Missing any one condition means GST applies.
How to fix it
Document every condition. Ensure the written agreement specifically states the sale is of a going concern. Verify the buyer's GST registration. Transfer all leases, licences, and operational assets. Continue operating the business until settlement day.
Input tax credit guide
Which business purchases can you claim GST credits on? This table covers the most common purchases for real estate & property businesses.
| Purchase | Credit? | Notes |
|---|---|---|
| Commercial property purchase (taxable) | Yes | Full GST credit on taxable commercial property acquisitions |
| Commercial fit-out and renovations | Yes | Construction and fit-out costs for commercial premises |
| Commercial property insurance | Yes | Landlord insurance for commercial property |
| Agent commission (commercial property) | Yes | Agent fees for selling or leasing commercial property |
| Legal and conveyancing (commercial sale) | Yes | Professional fees for commercial property transactions |
| Residential property purchase | No | Residential property sales are input-taxed — no GST credit |
| Residential rental repairs and maintenance | No | Related to input-taxed residential rent — no credit |
| Agent commission (residential property) | No | Related to input-taxed residential sale or rental — no credit |
| Residential property insurance | No | Related to input-taxed supply — no credit |
| Mixed-use property expenses | Yes | Apportion between taxable (commercial) and input-taxed (residential) use |
BAS tips for real estate & property
Separate commercial and residential property income
Report commercial rent at label G1 (taxable sales). Residential rent is input-taxed and goes at label G4. Never include residential rent in your taxable sales figure.
Report property sales in the correct BAS period
On accrual basis, report GST on a property sale when the contract settles (the supply is made at settlement). On cash basis, report when payment is received. For progress payments on off-the-plan purchases, the timing may differ.
Apportion input credits for mixed-use properties
If a property has both commercial (taxable) and residential (input-taxed) use, you must apportion GST credits. Common methods include floor area, revenue, or time-based apportionment. Choose a fair and reasonable method and apply it consistently.
Lodge the GST property settlement form
Sellers of new residential premises must lodge Form 1 (GST property settlement notification) with the ATO before settlement. This notifies the ATO of the withholding amount and provides details of the transaction.
Frequently asked questions
ATO sources & references
All information in this guide is based on the following ATO publications and rulings.