GST basics

Practitioners need some basic GST knowledge and logical thinking to answer many GST questions. Here are some handy basics to help you navigate your next GST question.

A search of the ABN lookup site will answer the registration question. You do however need to know in what capacity the vendor holds the property or asset as it is the GST status of this capacity that is relevant. Is it in their own right, in a partnership, as a trustee or part of a group? These are questions you should ask the vendor.

If the vendor is not registered, are they required to be registered? Registration is required if the vendor’s turnover from their enterprise is $75,000 or more.

Turnover consists of current and projected GST turnover and includes turnover from all activities and sources other than salaries and input taxed turnover such as residential rents. It is not a requirement that the enterprise be one relating to dealings in land and is not judged on a property-by-property basis.

Section 188-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) excludes the proceeds of realisation of a capital asset from projected GST turnover, so avoiding the situation where the sale itself triggers a requirement to be registered. This exclusion does not apply where land is trading stock, and land may become trading stock for income tax and GST purposes if acquired for the purpose of resale. The proceeds will be considered turnover and invariably exceed the $75,000 threshold resulting in a need for registration. This means you need to understand the vendor’s purpose when they bought the property.

See GSTR 2001/7 about the meaning of turnover.

If your vendor is selling as mortgagee in possession then the GST consequences are determined not by the GST status of the mortgagee, but by that of the mortgagor – see s.105-5, GST Act.

The primary issue is whether a hypothetical supply by the mortgagor would have been taxable. If it would, then the mortgagee’s supply will be taxable.

However, if the mortgagee believes on reasonable information that the sale or supply is not taxable, or the mortgagor gives the mortgagee a written notice stating fully the reasons why it is not a taxable supply, section 105-5 says it will not be a taxable supply.

Similarly, for sales by executors or administrators, the GST consequences will be the same as if made by the deceased.

Once you determine if the vendor is registered, or required to be registered, you need to consider the property being sold. New residential premises have some simple issues that catch out some practitioners.

Once you determine if the vendor is registered, or required to be registered, you need to consider what is being sold. Sales of land and sales of businesses are the areas where many practitioners must consider the GST requirements.

Goods and services that do not include GST are called input-taxed supplies because the vendor cannot claim GST credits for the price of the ‘inputs’ into the goods or services.

New residential premises have some simple issues that catch out some practitioners. New residential premises, namely, substantially renovated or built in the last five years and not previously sold, will be a taxable supply if it is sold in the ‘furtherance of an enterprise’.

The sale of a vendor’s own home will not be a supply in the furtherance of an enterprise, even if the vendor is registered for GST. GST will not be payable, but a withholding notice must still be provided by the vendor. It should state that the property is a private asset used for domestic purpose and not sold in the furtherance of an enterprise.

New residential premises will be sold in the furtherance of an enterprise and subject to GST if the vendor built the premises with a view to selling it for a profit, even if it is a one-off transaction. It does not need to be a multi-lot development to constitute an enterprise.

Existing residential premises are residential premises that do not meet the definition of new residential premises set out above. They are called input-taxed and will not be subject to GST even if the vendor is registered for GST.

Vacant land, even if zoned residential, is not considered existing residential premises. Vacant land is not input-taxed and is subject to GST when sold if the vendor is registered or required to be registered for GST and sale is in the furtherance of an enterprise.

The sale of commercial real estate is not input taxed and will likely to subject to GST unless it is GST-free as part of the sale of a going concern. For more information of going concern rules see

GST FAQs - Going Concern

GST-free: Sale of a going concern

A vendor of residential premises or potential residential land must give a purchaser a written notice stating whether withholding is required before settlement. Importantly, this requirement applies to all residential land, not just new residential land except for:

• supply of commercial residential premises

• supply of potential residential land where the purchaser is registered for GST and acquires the land for a creditable purpose (section14-255(2)).

This means the vendor must give a withholding notice for most existing residential land even though it will say that no withholding is required.

GST withholding will only be required if the vendor is registered or required to be registered for GST. If neither apply, then there is no GST payable, so none needs to be withheld by the purchaser.

GST withholding requirements only apply to relevant contracts of sale or long-term leases (50 year or more):

• entered into after 1 July 2018, or

• entered into before 1 July 2018 , if the first payment, after the deposit, occurs on or after 1 July 2020.

The relevant contracts or long-term leases to which GST withholding applies are contracts for:

• new residential premises that are not:
  o created through substantial renovations or
  o commercial residential premises (e.g. motel – see GSTR 2012/6 for definition)

• potential residential land that is included in a property subdivision plan at the time of supply (i.e. settlement), where:
  o the land does not contain buildings used for residential or commercial purposes, i.e. vacant land
  o the recipient is not registered for GST and does not acquire the land for a creditable purpose.

The property subdivision plan does not need to be a new subdivision, it can be an old one. Most property was part of a subdivision at some point, other than property being sold on crown allotments.

• LPLC GST checklist
• ATO GST property decision tool 
• GST withholding practical examples
• Common GST question – new residential property and no GST registration
• GST withholding special condition
• Vendor/Supplier GST withholding notice