GST on a property sale can be 10% of the price, or nothing at all. Which one depends on who's selling, what's being sold, how it's been used, and what the contract says. Get it wrong and the seller can end up paying one-eleventh of the price out of their own proceeds, or the buyer can end up with a GST bill and higher stamp duty they didn't budget for.
This guide walks through when GST applies, the main exemptions (going concerns and farmland), the margin scheme, the GST at settlement withholding rules, and the contract clauses that decide who bears the cost. It also covers how GST sits next to the capital gains tax changes from 1 July 2027, which are law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
When does GST apply to a property sale?
Two questions decide whether a sale is a taxable supply.
1. Is the seller registered, or required to be, and is the sale made in the course of their enterprise? A builder, developer, commercial landlord or business owner selling business premises usually is. Someone selling their home, or an investor selling an existing rental house, usually isn't, for that sale. A one-off development to sell new dwellings is usually an enterprise. The registration threshold is $75,000 of GST turnover, and the sale of new residential premises counts towards it. Our guide on when you need to register for GST explains the turnover test.
2. What kind of property is it?
| Property | GST treatment when sold in the course of an enterprise |
|---|---|
| Existing residential premises (houses, units that aren't new) | Input taxed: no GST on the sale, no GST credits on the related costs |
| New residential premises (newly built, substantially renovated, or replacing demolished premises) | Taxable: GST is payable |
| Vacant land, including residential lots | Taxable (unless farmland or another exemption applies) |
| Commercial property (shops, offices, factories, warehouses) | Taxable, unless sold as a GST-free going concern |
| Farmland used for farming for at least 5 years, bought to keep farming | GST-free |
| Commercial residential premises (hotels, motels, boarding houses) | Taxable |
If the sale isn't in the course of an enterprise, or the seller isn't registered and isn't required to be, there's no GST, whatever the property type.
Residential property: new or existing?
Residential premises are generally "new" if they haven't been sold before as residential premises, and haven't been rented for a continuous five years since they were built or substantially renovated. A "substantial renovation" means removing or replacing all or most of the building, not a new kitchen and bathroom.
The GST meaning of "new residential premises" is not the same as the "eligible new residential dwelling" test in the 2027 CGT and negative gearing changes, whose definition is still being finalised. A property can be new for one and not the other. Check both.
What is a GST-free going concern for property?
A commercial property sold with a tenant in place can be a GST-free supply of a going concern. For property, the enterprise being sold is usually the leasing enterprise. All of these must be true:
- The sale is for consideration.
- The buyer is registered, or required to be registered, for GST.
- The seller supplies everything necessary for the enterprise to continue, which for a leased building means the property with the lease in place.
- The seller carries on the enterprise until the day of settlement.
- Seller and buyer agree in writing that it's a going concern sale, usually in the contract.
| Situation | Going concern? |
|---|---|
| Fully leased shop sold with the lease assigned | Usually yes, if all conditions are met |
| Partly leased building, vacant floors | Can be, if the vacant part is being actively marketed for lease as part of the enterprise; needs care |
| Owner-occupied premises sold to a third party | No leasing enterprise to transfer, so generally not, unless the owner's business is sold with it |
| Owner's company leases the building from the owner's trust, and both are sold together | Can be, but check each supply separately |
| Tenant's lease ends before settlement | Likely fails: no leasing enterprise on the day |
| Buyer isn't registered and isn't required to be | Fails |
If the going concern treatment fails, the sale is taxable. Whether the buyer then pays extra depends on the contract. A well-drafted contract has a clause that adds GST to the price if the going concern treatment fails. Without it, the seller may bear the GST out of the price.
When is farmland GST-free?
The sale of freehold farmland is GST-free if:
- the land was used for a farming business for at least five years immediately before the sale, and
- the buyer intends to use it for a farming business.
Fixtures such as fences, sheds, dams and workers' cottages are included. The farmhouse can be included if its private use doesn't stop the land being farmland in character.
There's a separate rule for subdivided farmland: a sale is GST-free if the land was farmed for at least five years, can be used for residential purposes, and is sold to an associate of the landowner for no payment or less than market value. This is aimed at farming families passing house blocks to relatives.
A buyer of GST-free farmland that includes residential premises may need to make an increasing adjustment for the part that's used privately or for input-taxed purposes. Farmers buying and selling land should have both sides checked, and our farm accountant work covers it.
How does the margin scheme work?
The margin scheme lets a seller calculate GST on the margin on the sale instead of the full price. The margin is broadly the sale price less what the seller paid for the property (or, for property held since before 1 July 2000, a valuation at that date). Construction costs aren't deducted from the margin, but the seller still claims GST credits on them separately.
Conditions:
- The seller and buyer must agree in writing to use it, usually in the contract.
- It's not available if the seller acquired the property through a taxable sale where GST was calculated on the full price (without the margin scheme).
- Special rules apply where the property was inherited, bought from an associate, or acquired GST-free.
- A buyer under the margin scheme can't claim a GST credit for the purchase. That rarely matters for a home buyer, but matters a lot for a registered business buyer.
It's most valuable on new residential premises and residential lots, where most buyers aren't registered and can't claim GST back anyway.
What is GST at settlement withholding?
For sales of new residential premises and potential residential land (lots in a subdivision that could be used for new homes), the buyer must withhold an amount from the price and pay it directly to the ATO at settlement:
- 1/11 of the price for a fully taxable sale, or
- 7% of the price for a margin scheme sale.
The seller must give the buyer written notice before settlement saying whether withholding is needed, how much, and when. The buyer lodges the ATO's online forms and pays at or before settlement, usually through their conveyancer. The seller then gets a credit for the withheld amount on their next BAS.
Withholding doesn't apply to existing residential premises, commercial property, or potential residential land bought by a registered buyer for a creditable purpose.
This is separate from foreign resident capital gains withholding, which applies to all sales of Australian real property unless the seller provides an ATO clearance certificate. That rate is 15% with no minimum threshold. Both can apply to the same contract, and they're calculated separately.
Worked examples
Hypothetical, rounded figures.
Example 1: a new townhouse under the margin scheme
A developer bought a block in 2019 for $330,000 (per lot, after apportionment) from a private seller with no GST. It builds a townhouse and sells it to a home buyer for $990,000, with the margin scheme agreed in the contract.
| Fully taxable | Margin scheme | |
|---|---|---|
| GST on the sale | $990,000 ÷ 11 = $90,000 | ($990,000 − $330,000) ÷ 11 = $60,000 |
| Withheld by buyer at settlement | $90,000 (1/11) | $69,300 (7%) |
| Balance the developer pays (or is refunded) on its BAS | $0 | $9,300 refunded |
| GST credits on construction | Claimed either way | Claimed either way |
The margin scheme saves $30,000 of GST. The 7% withholding is more than the margin scheme GST here, so the developer gets the difference back through its BAS. Cash flow matters: plan for it.
Example 2: a leased warehouse where the going concern fails
An investor's trust is registered for GST and sells a leased warehouse for $2,000,000 "plus GST", agreeing it's a going concern. Two weeks before settlement, the tenant leaves.
- On settlement day there's no leasing enterprise to transfer, so the going concern treatment fails.
- The sale is taxable: GST of $200,000.
- Because the contract says "plus GST", the buyer pays $2,200,000, and if registered, claims $200,000 back on its BAS. Duty may be higher because of the GST-inclusive price.
- If the contract had said the price was GST-inclusive, or had no fall-back clause, the trust could have been left paying $181,818 (one-eleventh of $2,000,000) out of its own proceeds.
How does GST interact with the 2027 CGT changes?
GST isn't changed by the CGT reforms. But the same sale usually has both a GST and an income tax answer, and the 1 July 2027 changes affect the income tax side:
- For an investor selling commercial property or land on capital account, growth to 30 June 2027 keeps the 50% CGT discount, and growth after that date gets indexation and, for resident individuals, the 30% minimum tax. The CGT event usually happens on the contract date.
- GST paid on a sale isn't part of your capital proceeds. GST credits you claimed on costs aren't part of the cost base.
- For new builds, the CGT and negative gearing carve-outs use a different definition from GST's "new residential premises".
Our guide to the CGT discount changes from 1 July 2027 has the detail.
Mistakes we see with GST on property
- A contract that's silent on GST for a taxable sale, so the price is treated as GST-inclusive.
- Going concern sales that fail because the lease ended, the tenant left, or the buyer wasn't registered, with no fall-back clause.
- Margin scheme not written into the contract before settlement.
- Trying to use the margin scheme on property bought under a fully taxable sale.
- No GST at settlement notice given to the buyer.
- A one-off developer who never registered, then finds GST on the sales and no credits on the build.
- Renting new units for a few years before selling, and assuming they're no longer new.
- Treating a sale as farmland GST-free when the buyer doesn't intend to farm.
- Forgetting the clearance certificate, so 15% of the price is withheld for the ATO.
What to send us before a property sale
- The draft contract, especially the GST clauses and any special conditions
- Your purchase contract and settlement statement for the property
- Both parties' ABNs and GST registration status
- Current leases and the tenancy position expected at settlement
- How the property has been used: residential, commercial, farming, and for how long
- Construction or renovation details and dates, if any
How BPAG helps
- Before you sign. Our GST on property agent works through the sale: enterprise, property type, going concern, farmland, margin scheme and withholding. Your accountant reviews it against the contract and the facts, and tells you and your solicitor what the clauses should say.
- At settlement. We prepare the GST at settlement notice and check the withholding figures, and make sure the clearance certificate is in place.
- After settlement. We report the sale on your BAS and claim the withholding credit. Our BAS pre-lodgement check catches GST coding errors before lodgement, and our BAS and GST service handles the rest.
- For developments. See our guide to property development tax, which covers income versus capital, structure and timing. For duty on the purchase, our state taxes service covers each state.
The AI agents draft. A qualified accountant reviews and signs off every GST treatment and every lodgement, and nothing goes to you or the ATO without a person approving it. Contracts are prepared by your solicitor or conveyancer, and we work with them on the GST clauses.
Frequently asked questions
Do I pay GST when I sell my house?
No, not if it's your home or an existing residential property. Sales of existing residential premises are input taxed, and the sale of a private home isn't part of an enterprise anyway. GST arises on residential property only when new residential premises (or residential land) are sold in the course of an enterprise, usually by a builder, developer or someone doing a one-off project.
When does a new home stop being 'new' for GST?
Generally once it has been sold as residential premises before, or once it has been used for residential accommodation (such as being rented) for a continuous period of five years since it was built or substantially renovated. A developer who rents unsold units for a while and then sells them may still be selling new residential premises, and may have adjustments to make.
Does stamp duty apply to the GST?
In many cases, yes. Transfer duty is usually calculated on the full consideration, which can include GST. That's one reason a GST-free going concern or a margin scheme sale matters to the buyer as well as the seller. Check the rules for your state.
What if the contract doesn't mention GST?
If a contract for a taxable supply is silent, the price is generally treated as including GST. That means the seller pays one-eleventh of the price to the ATO out of what they receive. Always state clearly whether the price is GST-inclusive, plus GST, or a GST-free supply.
Can I use the margin scheme on commercial property?
The margin scheme can apply to sales of real property generally, not only residential, if the conditions are met and both parties agree in writing. In practice it matters most on new residential premises and land, because buyers of commercial property are usually registered and can claim the full GST back.
Do I need a clearance certificate as well?
Yes, if you're selling Australian real property. That's a separate regime from GST. Without an ATO clearance certificate, the buyer must withhold 15% of the price under the foreign resident capital gains withholding rules, even if you're an Australian resident. Apply early.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.