GST Treatment of Property Sales

Last updated June 2011

If you are registered for GST and purchase a property you can expect to be investigated by the ATO when claiming a refund of the GST you paid.

The ATO has issued a public ruling on property transactions in general, and an interpretive decision in respect of land sold on an instalment basis.

The ATO has declared that where the terms of settlement are under a standard land contract there is no GST entitlement until the time of final settlement.

This is to be contrasted with where the sale of land is on an instalment basis (or on other terms that do not meet the definition of a ‘standard land contract’). These situations will attract GST upon payment of the first instalment.

This distinction shows that supplies of land are not as straightforward as some taxpayers might imagine. Both the form and substance of a contract are important in determining supply for GST purposes.

But this is not the end of the story. Other factors you need to consider before you try to claim the GST back on a property purchase include (but are not limited to):

• The rules around tax invoices
• Whether the purchase was subject to GST in the first instance or was exempt for some reason (eg the purchase of farm land or of a going concerns)
• Whether you are reporting on a cash or accruals basis.

The ATO maintains a permanent focus on this area due to the number of errors people make. Because of the amounts involved, any mistake results in very large penalties (which makes the Government very happy). This is definitely an area where you need to ensure you are right before making your claim.