Residential premises include houses, units and flats that are occupied or can be occupied as residences. They are considered new when any of the following apply:
- they haven't been sold as residential premises before
- they've been created through substantial renovations
- new buildings replace demolished buildings on the same land.
If you build new residential premises for sale:
- you're liable for GST on the sale
- you can claim GST credits for construction costs and any purchases you make related to the sale (subject to normal GST credit rules).
Generally, you pay the normal GST rate of one-eleventh of a property's sale price.
However, if you're eligible, you can work out your GST liability using the margin scheme. Under the margin scheme you pay one-eleventh of the margin for the sale of the property, rather than one-eleventh of the total sale price.
If you sell residential premises or potential residential land:
- you may be required to notify your purchaser in writing (before settlement) whether or not they are required to withhold GST from the contract price and pay this directly to us
- you are still required to report the sale on your business activity statement.
Different rules apply for residential premises that are no longer new.
Residential premises are not considered new if they have been rented out continuously for five years or more (unless they were held for sale and rent at the same time).
If residential premises are not new, the sale of the property after being rented out is input-taxed. If you have claimed GST credits on construction costs and related purchases of non-new premises, you will have to make adjustments that reverse these credits. This is because you are not entitled to GST credits for things purchased to make input-taxed supplies.
If you rent out the new premises while you are planning to sell it, you will need to adjust part of the GST credits you claimed. You must show you intend to sell the premises. Actively marketing the premises for sale is one way of showing this.
- GST and the margin scheme
- Registering for GST
- GST at settlement
- GST and residential property
- Change in use of your property
An off-the-plan purchase occurs when the buyer enters into a contract to buy new residential premises before construction is completed. At this stage the buyer is purchasing a contractual right to have the premises built.
On settlement, the buyer:
- generally pays a deposit and signs a contract with the developer, paying the balance of the purchase price
- is purchasing new residential premises and the purchase price includes GST.
However, if you as the 'buyer' sell the contractual right before settlement, you are not selling new residential premises. This means GST will apply if the sale is made in the course of your GST-registered business.
The sale of an off-the-plan property may be an enterprise in its own right and may form part of the seller's GST registration turnover threshold.
- GST and property
- GSTR 2009/4: Goods and services tax: new residential premises and adjustments for changes in extent of creditable purpose
- GSTR 2003/3: Goods and services tax: when is a sale of real property a sale of new residential premises?
- GSTR 2000/24: Goods and services tax: Division 129 – making adjustments for changes in extent of creditable purpose