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How GST Applies When Selling Property in Queensland

Most established home sales are GST-free, but new builds and some other property types are not. Here is what Queensland sellers need to understand about GST before they list.

For most owners selling an established family home in Queensland, GST is simply not a consideration. The sale of existing residential premises is input-taxed under the GST Act, which means GST does not apply to the sale price and there is nothing further to think about from a goods and services tax perspective. However, GST does come into play in a specific set of circumstances that are more common than many sellers realise, and the consequences of misunderstanding them can be significant. This article explains the key distinctions in plain English. It is not tax advice and is not a substitute for speaking to your accountant before you list.

Established homes versus new residential premises

The most important distinction in Queensland property GST is between established residential premises and new residential premises. An established home that has been previously occupied as a residence is generally GST-free on sale. This covers the vast majority of private home sales: the family home you have lived in, the investment property you have rented out for years, and comparable situations.

New residential premises are a different category. They include properties that have never been sold as residential premises before, as well as properties that have been substantially renovated to the point where they are treated as new for GST purposes. When a property developer or builder sells a new dwelling or townhouse, GST typically applies to that sale. The buyer generally sees this reflected in the contract, and the seller (if registered for GST) remits the tax to the ATO.

The boundary between an established home and a substantially renovated property is not always obvious, and this is an area where genuine uncertainty exists. If you have done significant structural work on a property you intend to sell, whether it was purchased as a renovation project or was your own home, it is worth getting a tax adviser's view on how the renovations are characterised before you set a price.

Vacant land and subdivisions

Vacant land sold by a GST-registered entity is typically subject to GST. If you have subdivided a residential property and are selling the vacant allotment, or if you are selling a development site, GST may well apply. The analysis depends on whether you are carrying on an enterprise, whether you are registered or required to be registered for GST, and the nature of the land being sold.

Private individuals selling a single residential property in a one-off transaction are generally not carrying on an enterprise for GST purposes. But if you have been buying, developing, and selling properties as a regular activity, the ATO may view that activity as a business, in which case GST obligations follow. This is an area where the facts of the specific situation matter enormously, and the threshold between personal investment and enterprise is not always clear from the inside.

The margin scheme

Where GST does apply to a property sale, sellers who are GST-registered may be eligible to use the margin scheme. Under the standard GST method, GST is calculated as one-eleventh of the sale price. Under the margin scheme, GST is calculated as one-eleventh of the margin: the difference between the sale price and the original acquisition price of the property. For property that has appreciated significantly, this can result in a meaningfully lower GST liability.

Using the margin scheme requires certain conditions to be met, including that both parties agree in writing in the contract that the margin scheme applies. This cannot be added after the contract is signed. If you are selling a property where GST applies and you think the margin scheme might be beneficial, your accountant and conveyancer need to know before contracts are prepared.

GST withholding rules for buyers

Since 2018, GST withholding rules have required buyers of new residential premises and certain subdivided residential land to withhold the GST component from the purchase price and remit it directly to the ATO at settlement, rather than paying the full amount to the seller. This means if you are selling a new property, you will receive the sale price minus the GST component at settlement, with that component going directly to the ATO on your behalf.

The practical implication is that sellers of new premises need to understand their cash flow position at settlement will reflect this withholding. Your conveyancer and accountant should be factoring this into the settlement process. The withholding rules were introduced to prevent situations where sellers collected GST from buyers but failed to remit it to the ATO, and they operate largely in the background for well-advised transactions.

When to get professional tax advice

If you are selling an established home you have lived in for years and have not substantially renovated, you almost certainly do not need specific GST advice. But if any of the following apply to your situation, speak to your accountant before you list.

Get advice if you are selling a newly built property or a property you have substantially renovated with the intention of selling. Get advice if you are selling vacant land, a subdivided allotment, or a development site. Get advice if you have used any part of the property for business purposes, including running a business from home in a way that may affect capital gains treatment. Get advice if you are registered for GST for any reason and are selling property as part of that business activity.

Your real estate agent cannot provide tax advice, and nor should they. The question of whether GST applies to your specific sale is a question for your accountant. Getting that answer early means your contract can be structured correctly from the start, your price can account for any GST obligations, and there are no surprises at settlement.