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Selling Property! Will GST & the margin scheme apply to you?

The sale of an investment property in Australia can introduce intricate GST (Goods and Services Tax) considerations that often escape the notice of many property investors. However, there are specific scenarios where investors can mitigate their GST obligations.

While the sale of your primary residence is usually exempt from GST, selling an investment property can trigger GST obligations under specific circumstances, as explained by the Australian Taxation Office (ATO).

GST is typically applicable to property sales when:

–  The property is newly built residential premises that have not been previously sold as residential properties. This encompasses extensively renovated properties or those reconstructed after demolition.

–  The seller is GST registered and is required to report the sale in their GST filings. This condition applies to property investors engaged in formal business activities.

Here’s how the margin scheme works:

  1. Eligibility: To use the margin scheme, you must meet certain eligibility criteria. You can check your eligibility using the GST property decision tool provided by the Australian Taxation Office (ATO).
  2. Calculation: Instead of paying GST on the entire sale price, you pay GST only on the margin. The margin is the difference between the purchase price (what you paid for the property) and the sale price (what you’re selling it for).

Basically, Sale price minus purchase price equal’s the margin total, and margin divided by 11 is the GST payable.  

You can get more information and specific to your situation by contacting us or calling on 0420 432 410.

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