When diving into the world of property development, it’s easy to focus on plans, construction, and profit potential. But one often-overlooked area that can significantly impact your bottom line is Goods and Services Tax (GST).
Whether you’re managing a large-scale commercial building or a first-time house flipper, subdividing your backyard, understanding how GST applies to your project is essential. Missteps can lead to heavy tax bills, cash flow challenges, and even legal issues with the Australian Taxation Office (ATO).
In this blog, we’ll unpack what GST means for property developers, when you need to register, how to claim GST credits, and what traps to avoid.
What Is GST for Property Developer?
GST (Goods and Services Tax) is a 10% tax applied to most goods and services sold in Australia, including new property sales. Businesses registered for GST are required to collect it on sales and can claim back GST on eligible business expenses.
For developers, GST can be both a cost and a cash flow tool, if used correctly.
Is Property Development a Taxable Activity?
Yes, if you’re developing with the intention to sell, the ATO sees this as an enterprise, meaning you’re conducting business, and it becomes a taxable supply. This includes:
- Building a new residential dwelling to sell
- Renovating with the intent to flip
- Subdividing land and selling the lots
Once you cross the $75,000 threshold in annual turnover, you are required to register for GST.
When Does GST Apply in Property?
| Activity | GST Applies? |
| Brand New residential sales | Yes |
| Renovated property (major works) | Often, if considered “new” |
| Subdivided land (for sale) | Often, depends on intention |
| Existing home sales | Usually GST-exempt |
| Commercial property sales | Yes, unless sold as a going concern |
Claiming GST Credits
Once registered, you can claim back the GST included in your development costs, materials, contractors fee and even consultants fee. This reduces your net expenses significantly, helping with cash flow. But you can only claim GST credits if you’re selling the property. If you plan to hold and rent, you likely won’t be entitled to GST credits
Mixed-Use Projects: Selling Some, Holding Others
If you’re developing multiple properties and only selling a portion, you may be eligible to claim partial GST credits based on what you’re selling.
For example:
- You subdivide a 1,000 sqm lot into 10 parcels.
- You intend to sell 3 and hold 7.
- You may claim 30% of your development GST costs.
However, you still pay full GST on the 3 sales.
Key GST Schemes for Developer
Margin Scheme
This lets you pay GST on the profit margin (not the total sale price). It must be agreed to by both parties in the contract.
Example:
- Buy land for $1M → Sell for $2.1M → Profit = $1.1M
- Under the margin scheme: GST = $100,000 (1/11th of the margin)
- Without it: GST = $190,909 (1/11th of full sale price)
Sale of a Going Concern
If you sell a leased commercial property, you may be able to do so GST-free, provided both buyer and seller are GST-registered and agree to the terms.
GST Return Cycles – What’s Best for Developers?
Monthly is best during active development because:
- Expenses are high and frequent
- Faster GST refunds mean better cash flow
You can switch cycles, but only at the end of your current cycle, so plan ahead.
When Should You Register for GST?
As early as possible, especially if:
- You’re sure you’ll be selling the property
- You’re incurring GST-inclusive costs now
- You need the GST refund to fund the project
Delaying registration can limit your ability to claim GST on early expenses, especially those paid more than 12 months ago.
Common GST Mistakes in Development
- Not registering early enough
- Claiming full GST credits when holding part of the development
- Assuming residential sales are always GST-free
- Ignoring lender GST requirements
- Failing to consult an Tax accountant before starting
Final Thoughts: Do Your GST Homework
GST in property development is complex and one-size-fits-all advice rarely applies. Whether you’re flipping a single home or building a multi-unit complex, the stakes are high.
Talk to an accountant early. Understanding your GST obligations can:
- Maximise your cash flow
- Help you avoid penalties
- Boost the profitability of your development
If you’re starting a project and unsure about GST, we’re happy to help. Reach out to our TFP Tax Accountant team in perth to make sure you’re on the right track.
At TFP Tax Return Services, we specialize in individual tax return managing everything from simple to complex cases such as GST implication on property development. Our experienced Tax Agent, Tax Accountant, or Tax Advisor is just a call away to assist with your tax matters.
We’re here to help—get started by filling out your enquiry form at- https://www.tfptax.com.au/contact-us.
