GST


Clients that regularly buy and sell residential properties will need to consider the application of GST on residential property to avoid any issues arising in the future. It is recommended that regular buyers and sellers of residential real estate ensure they have addressed the matter of GST with their accountant. These clients should also ensure that any contracts they enter for the sale or purchase of residential real estate deal with the issue of GST if it is applicable.
 
In the sale of commercial, industrial or retail properties basic enquiries should be undertaken prior to sale, to establish the GST registration or otherwise of the Seller and Buyer.
 
BASIC PRINCIPLES OF GST
 
Remember the following essential elements of a taxable supply when dealing with GST and property:
  1. a supply for consideration
  2. in the course and furtherance of an enterprise
  3. the supply is connected to Australia
  4. the entity making the supply is registered
The fourth point is the crucial one for considering whether or not GST applies to the sale of a property. 
 
At listing:
 
When listing a commercial property for sale we suggest you establish the "real" owner as this may not be the entity that is on the Title as the registered proprietor. It may be that the registered proprietor is holding the property in Trust for a Superannuation Fund, a Family Trust or for a Joint Venture Group which is not disclosed on the Offer and Acceptance Contract or Certificate of Title.
 
So if your searches do not confirm the registered proprietor as registered for GST it may be that the Super Fund, Family Trust or Joint Venture Group are registered and when all else fails ask the Seller for an ABN.
 
Also note the following:
  • An entity (e.g. an individual, company, or Trust) may have an ABN however due to the low income it generates, it may not be required to register for GST.
  • If an entity has an ABN but is not registered for GST it cannot charge GST on the supply of a property.
  • If an entity does not have ABN they cannot register for GST and they cannot charge GST on the supply of a property.
  • In order to charge GST on the supply of a property the entity must have an ABN and must be registered for GST.
  • For the Going Concern Provisions to apply the Seller and Buyer must both be registered for GST. Though some advice has been obtained that has indicated that the status of the Buyer may not be an issue. The standard REIWA GST annexure contains a statement/representation that the buyer will be registered for GST prior to Settlement so where a buyer is not currently registered they should be advised to register as soon as possible.
  • For a Buyer to claim an input Tax Credit for the GST paid in addition to or included in the purchase price the Buyer must be registered for GST.
  • If GST on the Margin Scheme is payable in addition to the purchase price the Seller must provide details of the amount of GST payable and how it has been calculated, so the Buyer will know what to pay in addition to the purchase price
  • If GST on the Margin Scheme is included in the purchase price it is not necessary for the Seller to provide details of the amount.
  • GST paid on the Margin Scheme cannot be claimed as an input tax credit by a Buyer and as such the Seller is under no obligation to provide a Tax Invoice.
  • It is the Seller who is responsible for payment of any GST to the ATO. Whilst the Seller may be able to recover GST from the Buyer by selling the property plus GST or inclusive of GST, it is the Seller that is the entity supplying the property so if the GST issue is not dealt with correctly it is the Seller that the ATO will pursue.
  • GST is paid to the Seller on Settlement and it is the Seller's responsibility to remit the GST to the ATO.
  • The Office of State Revenue (OSR) will charge duty on the GST inclusive price 
HOW TO FIND OUT IF A BUYER OR SELLER (AN ENTITY) IS REGISTERED FOR GST
  • Go to the ABR Public Search website now known as ABR lookup at www.abr.business.gov.au
  • Select Advanced Search
  • Type in the name of the company/entity you are looking for in the Search Text Box.
  • Hit the search button.
  • This will take you to the Search Results page. This page highlights the exact match and lists the close matches.
  • Click on the name that you require.
  • This takes you to the details for the Entity/Company you have selected. Print this page for your file, highlight the name, the ABN and GST registration.
  • Have a look at the information. The most important information you need is to establish whether or not the Entity is registered for GST.
  • If an entity is "Not currently registered for GST". This entity cannot charge GST on the supply of a property.
Duty considerations
 
Duty is calculated on the GST inclusive price and as such it is imperative that the Contract clearly states how the property is being supplied i.e. inclusive of GST/exclusive of GST/Margin Scheme or Going Concern.
 
Tax invoice
 
If GST is being paid at Settlement whether it is included or addition to the purchase price then the Seller must provide a Tax Invoice to the Buyer unless the GST is being calculated using the Margin Scheme.
 
The original Tax Invoice should be handed over to the buyer's conveyancer at Settlement who in turn should provide it to the Buyer.
 
The Tax Invoice should contain the following minimum information:
  • Name of the Seller/entity selling the property
  • The entity's ABN (double check this against searches you have undertaken and address any discrepancies)
  • The address of the property being purchased (i.e. what is being supplied)
  • The Buyer's details - ensure that the details are correct (i.e. if the Buyer is Trustee for make sure the full details are shown on the Tax Invoice)
  • The Purchase Price
  • The GST
  • The Total
NB if the GST has been calculated using the Margin Scheme the Seller is NOT obliged to provide the Buyer with a Tax Invoice and as such a Tax Invoice should not be requested. A Buyer cannot claim and input Tax Credit for GST that has been calculated on the Margin Scheme.