GST on an Australian property sale: when it applies, the margin scheme, going concern and farmland

Most residential conveyances carry no GST: the sale of existing residential premises is input taxed. GST arises on new residential premises, vacant land and commercial property sold by a registered entity, and the file has to settle three questions before exchange: is the sale taxable, is it GST-free, and has the margin scheme been agreed in writing.

That is the order they have to be answered in. A file that reaches settlement without a recorded answer to each one is a file where someone is about to find out the price was quoted GST-inclusive by accident, or that the margin scheme election nobody obtained can no longer be obtained. This guide sets out the treatments, the conditions attached to each, and what a practice management system should be recording so the answer sits on the file rather than in the conveyancer's head.

Start from the four possible treatments

GST on a property sale is worked out under the A New Tax System (Goods and Services Tax) Act 1999. Every sale lands in one of four places.

The distinction between input taxed and GST-free is the one that catches people. Both produce a sale with no GST on it, but only the GST-free categories let the seller keep the credits on the agent's commission, the legal fees and the marketing. On an input taxed sale the seller wears the GST on those costs.

Existing residential premises, and the five-year rule

Section 40-65 makes the sale of real property input taxed to the extent that it is residential premises to be used predominantly for residential accommodation. The exceptions in s 40-65(2) are commercial residential premises and new residential premises. That is why an ordinary house sale produces no GST whether the seller is registered or not.

"New residential premises" is defined in s 40-75(1). Premises are new if they have not previously been sold as residential premises and have not previously been the subject of a long-term lease, or they were created through substantial renovations, or they were built to replace demolished premises on the same land.

Premises can stop being new. Under s 40-75(2), if for a period of at least five years the premises have only been used for making input taxed supplies of residential rent, they are not new residential premises, and the sale is input taxed. Two points belong on the file rather than in memory:

• The five years runs from when the premises first became residential premises, or were last substantially renovated, or were last built.
• The period has to be unbroken. The ATO's position in GSTR 2009/4 is that applying the premises to a creditable purpose means they have been used other than for making input taxed residential rent supplies, so the five-year requirement is not met. A developer who marketed the property for sale during the period, or claimed credits on it, may have broken the run.

A seller relying on the five-year rule is relying on five years of their own conduct. Record the evidence, not just the conclusion.

Vacant land

Vacant land is not residential premises, because there is no building on it, so the concession in s 40-65 cannot apply. Sold by an entity registered for GST in the course of its enterprise, the sale is taxable. Sold by a private owner not carrying on an enterprise, GST does not arise at all. The practical question is rarely the law: it is whether the seller is registered and whether this sale forms part of an enterprise, which is why a subdivision repeated across three properties changes the answer.

Commercial premises and the going concern route

A sale of commercial premises by a registered entity in the course of its enterprise is a taxable supply. Section 38-325 makes the supply of a going concern GST-free instead, and the conditions are cumulative:

• the supply is for consideration;
• the recipient is registered or required to be registered;
• the supplier and the recipient have agreed in writing that the supply is of a going concern;
• the supplier supplies all of the things necessary for the continued operation of the enterprise; and
• the supplier carries on the enterprise until the day of the supply.

For a tenanted commercial building the enterprise is usually the leasing enterprise, which is why the lease and its assignment are what make the going concern work. The written agreement is a condition, not a formality, and it is the one most often left to the contract's tick box without anyone checking that the recipient is in fact registered.

Farmland

Section 38-480 makes the supply of farmland GST-free where a farming business has been carried on on the land for at least the five years preceding the supply, and the recipient intends that a farming business be carried on on the land. The ATO's farmland guidance states that the provision does not require the purchaser to carry on the farming business themselves, so a purchaser who leases the land to a farmer can still satisfy it.

Farmland and going concern are separate routes for a reason. A farm sale often fails the going concern test while remaining capable of qualifying under s 38-480: the business may not have been operating, the vendor may be keeping the machinery, or the land may be sold without the things the enterprise needs. Test both rather than assuming the contract's choice was considered. The Legal Practitioners' Liability Committee's GST guidance for practitioners, updated 28 October 2026, is a useful second check. The purchaser's intention is a statement about the future, made by the purchaser: get it in writing and dated, because it is the only evidence that will exist years later.

The margin scheme, and the agreement that must exist before settlement

Where a sale is taxable, Division 75 allows GST to be worked out as 1/11th of the margin rather than 1/11th of the price. On the ATO's worked example, a $900,000 sale of property bought for $500,000 gives a $400,000 margin and GST of $36,363 rather than roughly $81,818.

Two conditions do the work. The sale has to be taxable, since the margin scheme is a method of calculating GST on a taxable supply and has nothing to offer on an input taxed or GST-free sale. And the supplier and the recipient have to agree in writing to use it, on or before settlement. The Commissioner can allow further time, but the default is that the window closes at settlement and does not reopen.

Eligibility is then cut down by s 75-5(3), and the structural point in the ATO's eligibility guidance is that eligibility can be inherited. Where the seller acquired the property as a GST-free going concern or as GST-free farmland, the seller's eligibility depends on whether the entity they acquired it from could have used the margin scheme. If that entity could not, the seller cannot either, and the disqualification carries down the chain and across amalgamated land.

A related trap is pricing. Because the margin is not known to the purchaser, a contract stating a price "plus GST" on a margin scheme supply leaves the purchaser exposed to an amount they cannot calculate. On a margin scheme sale, state a GST-inclusive price.

Withholding at settlement is a separate question

If the sale is of new residential premises or potential residential land, Subdivision 14-E of Schedule 1 to the Taxation Administration Act 1953 requires the purchaser to pay an amount to the ATO at settlement. Under s 14-250 that amount is 1/11th of the price, or 7% of the price where the parties have agreed that the margin scheme applies. The supplier must give the purchaser written notice before settlement. The ATO's GST at settlement guidance covers the forms and timing, and our earlier guide on withholding at settlement covers how this sits alongside foreign resident capital gains withholding.

Note the ordering: the withholding obligation follows from the GST treatment, and the 7% rate follows from the margin scheme agreement.

What the file has to carry

Six fields, recorded when the contract is drawn or reviewed, cover the ground.

How MatterFirst handles this

MatterFirst is a legal practice management platform for Australian law firms, built by North Cape Technology in Melbourne. It does not work out your GST position, and no practice management system should claim to. What it does is make sure the position is recorded, evidenced and carried through the documents.

Document AI reads an uploaded contract and extracts key terms, dates, parties and amounts onto the matter. Extraction rules are configurable, so a practice can define its own fields, putting the GST clause, the margin scheme election, the seller's registration statement and the stated price basis on the matter as data rather than as a clause somebody has to find again. Bulk review projects run the same questions across hundreds of documents and return a grid you can export, which is how a firm answers "which of our current files are margin scheme sales" without opening each one.

The obligations engine in matter management calculates dates from rules and cites the governing statute on the obligation it creates, so a date is traceable to its source. The margin scheme deadline and the supplier's withholding notice are both pre-settlement dates with a legal consequence if missed, which is the kind of date that belongs in a rule rather than a diary note.

Document generation is deterministic by default: a firm defines its own document types from merge fields, matter data projections and clause library entries, with AI used only where a section genuinely calls for synthesis. A GST clause, a margin scheme agreement or a supplier notification is the case for a clause library entry driven by matter fields, and automations can generate that document as a workflow step when the treatment field is set.

Trust accounting includes a compliance review workflow covering NSW, VIC, QLD and WA, matters can be recorded in all eight Australian jurisdictions, and data and AI processing run in the AWS region the firm chooses, Sydney by default.

How the platforms compare on what they publish

Buyers want to know what a vendor will tell them before a sales call. These cells were checked against each vendor's own public pages on 2 November 2026.

Sources: MatterFirst pricing, Smokeball pricing, Clio Australia pricing, Actionstep pricing, LEAP features.

MatterFirst suits Australian firms of roughly two to twenty fee earners doing conveyancing, property and general practice work that want onshore hosting, state-based trust accounting and structured extraction from contracts. Pricing is from $199 per month per workspace with users included, and each plan carries a monthly AI balance in Australian dollars. Firms depending on a self-serve connection beyond Microsoft 365, Google Workspace, Xero and Stripe should confirm what is connectable before committing: those four are the self-serve connections, and everything else runs through the documented REST API and webhooks.

Frequently asked questions

Does GST apply when I sell my house? Generally no. The sale of existing residential premises used predominantly for residential accommodation is input taxed under s 40-65, so no GST is payable and no input tax credits can be claimed on the costs of the sale.

Can I still use the margin scheme if I forgot to agree it in the contract? The agreement has to be in writing and made on or before settlement. The Commissioner can allow further time, so ask rather than assume, but treat settlement as the deadline.

How much GST does a purchaser have to withhold at settlement? Where Subdivision 14-E applies, s 14-250 requires 1/11th of the price, or 7% of the price where the parties have agreed that the margin scheme applies. Check the supplier's written notice, which must be given before settlement.

Is a farm sale GST-free automatically? No. Section 38-480 requires that a farming business has been carried on on the land for at least the five years before the supply, and that the recipient intends a farming business be carried on there. Both limbs need evidence on the file.

Does MatterFirst extract the GST clause from a contract of sale? Document AI extracts key terms, dates, parties and amounts onto the matter, and extraction rules are configurable, so a firm can define GST-specific fields such as the treatment, the margin scheme election and the price basis. It records what the contract says, and does not advise on the treatment.

Does MatterFirst handle Victorian trust accounting? Yes. The trust compliance review workflow covers NSW, VIC, QLD and WA, and matters can be recorded in all eight Australian jurisdictions. See pricing and AI pricing.

Before the next contract

The GST position is decided by facts that exist before exchange and cannot be reconstructed afterwards: whether the seller is registered, how long the premises have been rented, whether the business was still operating on the day of supply, whether anybody signed a margin scheme agreement. None of that is hard to capture. It is only hard to capture late. If you are weighing up systems for a property practice, the evaluation checklist sets out the questions worth putting to any vendor.

This guide is general information about how Australian GST provisions apply to property sales. It is not tax advice on any particular transaction.