GST applies differently depending on the type of property and how it is being used. The sale of a new residential property is generally taxable. The sale of an existing residential property is generally not. Commercial property transactions are taxable in most cases. Understanding the rules before you develop, sell, or purchase property is essential — GST on a property transaction can represent a significant amount.
New vs Existing Residential Property
The most important distinction in property GST is whether the property is new or existing.
| Property type | GST applies? |
|---|---|
| New residential property (first sale) | ✅ Yes — taxable supply |
| Substantially renovated property (first sale after reno) | ✅ Yes — treated as new |
| Existing residential property (subsequent sale) | ❌ No — input-taxed |
| Residential rent | ❌ No — input-taxed |
| Commercial property (new or existing) | ✅ Yes — taxable supply |
| Commercial property sold as going concern | ❌ No (if conditions met) |
| Vacant land (for residential development) | ✅ Yes — taxable supply |
New Residential Property
A property is “new” for GST purposes if it has not been sold as residential premises before, or if it has been substantially renovated. Substantially renovated means the majority of building materials (walls, floors, roof, etc.) have been replaced — not just cosmetic improvements.
If a developer builds and sells a new house or apartment, the sale is a taxable supply. GST of 1/11th of the sale price (or the margin, if the margin scheme applies) is payable to the ATO.
Example: A developer sells a new apartment for $660,000. GST is $60,000 (1/11th × $660,000). The developer’s net sale proceeds are $600,000 before other costs.
Existing Residential Property
The resale of a second-hand home is input-taxed — no GST applies, and the seller cannot claim input tax credits on sale-related costs (agent commissions, legal fees). This is why property portals advertise residential homes at a single price with no mention of GST.
The Margin Scheme
The margin scheme is an alternative method of calculating GST for property sales that can significantly reduce a developer’s GST liability. Under the margin scheme, GST is calculated on the margin (the difference between the sale price and the original purchase price of the land or property) rather than the full sale price.
Standard GST calculation:
GST = 1/11th × sale price
Margin scheme calculation:
GST = 1/11th × (sale price − acquisition cost)
Eligibility for the Margin Scheme
Both the seller and buyer must agree in writing to apply the margin scheme. The seller’s acquisition of the property must also qualify — broadly, the property must have been acquired before 1 July 2000 or acquired via a supply that was not fully subject to GST (e.g., an input-taxed purchase).
The margin scheme is commonly used where a developer acquires land that was not subject to GST (e.g., farmland) and develops it for residential sale.
Commercial Property
Commercial property transactions — sale of offices, warehouses, retail shops, factories — are generally taxable supplies. The seller charges GST and can claim input tax credits on related costs.
Going Concern Exemption
If you are selling a business together with its property as a going concern, the sale may be GST-free if:
- The seller and buyer agree in writing that the supply is a going concern
- The buyer is registered (or required to be registered) for GST
- The seller supplies everything necessary for the continued operation of the business
- The business is in operation at the time of supply
This is commonly used when a business owner sells their entire operation — the commercial property plus the business — as a single transaction.
GST Withholding on New Residential Property
From 1 July 2018, buyers of new residential properties must withhold GST from the purchase price and remit it directly to the ATO at settlement. This rule was introduced to prevent property developers from collecting GST from buyers and then dissolving the company before remitting it.
How it works:
- The buyer withholds 1/11th of the purchase price (or 7% if the margin scheme applies and is stated on the contract)
- The buyer lodges a GST withholding form and pays the withheld amount to the ATO on or before settlement
- The developer lodges their BAS and claims credit for the amount already remitted
Sellers of new residential property must notify buyers in writing if GST withholding applies.
Input Tax Credits for Property Developers
A developer constructing new residential property can claim input tax credits on construction costs, land purchase (if GST applied), architect fees, and other taxable inputs — because the development activity leads to a taxable supply (the new property sale).
If the developer later decides to rent the property out instead of selling, those properties become input-taxed (residential rent). In that case, the developer may need to repay some of the input tax credits already claimed.
Related Articles
- GST Australia Explained
- GST-Free vs Input-Taxed Supplies
- Rental Property Tax Deductions
- Capital Gains Tax on Property
- GST and Business Tax hub
Frequently Asked Questions
Does GST apply when I sell my home? No. The sale of your principal residence (or any existing residential property) is input-taxed — GST does not apply to the sale price.
I’m buying a new apartment off the plan — will I pay GST? The contract price for a new apartment typically includes GST. Check whether your contract states the price as GST-inclusive or exclusive. From 1 July 2018, you (as the buyer) are required to withhold and remit GST directly to the ATO at settlement — your conveyancer will manage this process.
Can I claim GST on stamp duty? No. Stamp duty is a state tax, not a taxable supply. There is no GST component in stamp duty.
This article provides general tax information. GST on property transactions can be complex and the financial consequences of getting it wrong are significant. Speak with a registered tax agent before entering into any property development or commercial property transaction. Find one through the Tax Practitioners Board register.