GST on Property Development: complete guide

Feasly’s Complete Australia Guide is a helpful “umbrella” resource on GST on property development, walking through registration, credits, the margin scheme and GST-at-settlement. The essentials, cross-checked against the Australian Taxation Office (ATO) and other advisers, are as follows. [feasly.com.au]

Registration and scope. Developers carrying on an “enterprise” must register for GST once turnover reaches or is expected to reach A$75,000 in a financial year. For developers, “turnover” includes sales of new residential premises, commercial property and subdivided/developed land. Even a single project can satisfy the enterprise test. [jdscott.co], [ato.gov.au]

Output and input GST. On a taxable sale of new residential premises, output GST is 1/11 of the sale price. Developers can generally claim GST credits (input tax credits) on construction, professional fees, marketing and other taxable inputs. Feasly’s worked example: 4 townhouses × $850,000 = $3.4m; output GST = $309,091; input tax credits on $1.76m of construction (including $160,000 GST) = $160,000; net GST payable = $149,091. [feasly.com.au]

GST at settlement (1 July 2018). For new residential premises and potential residential land, buyers must withhold the GST amount from the contract price at settlement and pay it directly to the ATO. Developers claim their input tax credits through the BAS and reconcile in the normal way. Modelling on gross sale prices without accounting for this withholding creates cashflow surprises at settlement. [ato.gov.au], [ato.gov.au]

Margin scheme. The margin scheme allows GST to be calculated only on the margin between sale price and eligible original acquisition cost / valuation, materially reducing the GST on new residential sales. Eligibility conditions are strict: the vendor must not have acquired the property in a fully taxable supply where GST was calculated on the full price, and the election must be in writing before settlement — it cannot be applied retrospectively. [jdscott.co]

Developer vs. investor. As Chan & Naylor and Symmetry Accounting explain, the ATO’s classification matters for both income tax and GST. Developers are taxed on ordinary income, cannot use the 50% CGT discount, and typically must register for GST. Investors sit under CGT rules, generally without GST. Intent, scale, repetition and business-like manner are the key indicators — even a one-off project can fall on the developer side. [chan-naylor.com.au], [symmetryco…ing.com.au]