What to Consider When Selling a New Residential Property: GST & Tax implications

Selling a new residential property in Australia involves a range of tax and GST considerations that can significantly impact your financial outcomes. One of the first steps is determining whether you’re operating as an enterprise—this can be the case even for a one-off transaction.

What is a New Residential Property?

A new residential property refers to any of the following:

• A property that has never been sold as residential property before.
• A property that has been substantially renovated.
• A new building replacing a demolished structure on the same land.
• A property that fits the above criteria and has been rented out:
  • For less than five years.
  • For more than five years but has been actively marketed for sale while rented.

GST Implications

When selling a new residential property, GST (Goods and Services Tax) generally applies. If you’ve built or significantly renovated the property, you must charge 10% GST on the sale price. Additionally, if your turnover from property-related activities exceeds the GST registration threshold, you must register for GST.

If you’re registered for GST, you can claim back the GST paid on development costs—such as construction, materials, and professional services. This helps offset the amount of GST owed when you sell the property.

Capital Gains Tax (CGT)

Selling a new property could trigger Capital Gains Tax (CGT), depending on your situation. If the sale is part of a property development business or you’re considered an enterprise, the profit may be classified as business income, not a capital gain. As a result, it will be subject to income tax rather than CGT.

Conclusion

Selling a new residential property involves complex GST and tax implications that require careful attention. To avoid unexpected tax liabilities and ensure compliance with ATO regulations, it’s essential to seek expert advice.

For personalised guidance, contact our team at Altitude Advisory. Our specialists can help you navigate the complexity of GST and tax obligations, ensuring a smooth and compliant transaction.