Posted February 21, 2025

Do I Need to Be Registered for GST When Buying a Property in South Australia?

Buying property is a significant financial decision, and understanding the tax implications can help avoid unexpected costs and compliance issues. One of the most common tax-related questions among property buyers in South Australia is whether they need to be registered for Goods and Services Tax (GST) when purchasing property.

GST is a 10% tax on most goods and services sold in Australia, including certain property transactions. However, not all property purchases attract GST, and whether you need to be registered for GST largely depends on the nature of the transaction, the type of property being purchased, and whether you are buying the property as an individual or as part of a business entity.

In Australia, GST registration is mandatory for businesses with an annual turnover of $75,000 or more. But does this mean property buyers must also register? The answer depends on factors such as whether the property is classified as new residential, commercial, or existing residential property, and whether the purchase is part of a business activity. Additionally, recent changes in GST withholding laws mean that some buyers may have obligations to pay GST directly to the Australian Taxation Office (ATO).

This article will provide a comprehensive breakdown of when GST applies to property purchases, who needs to register for GST, and what obligations property buyers in South Australia should be aware of. Whether you’re purchasing a home, investing in rental properties, or buying land for commercial development, understanding these rules will help you make informed decisions and ensure compliance with Australian tax laws.

Understanding GST and Property Transactions in South Australia

The Goods and Services Tax (GST) is a broad-based tax of 10% applied to most goods, services, and some property transactions in Australia. However, not all property purchases are subject to GST, and whether it applies depends on factors such as the type of property being bought and whether the buyer is operating as a business or an individual.

In South Australia, property transactions can generally be classified into three main categories when it comes to GST:

New Residential Premises – If you are purchasing a newly built home or a property that has undergone significant renovation and has not been lived in before, GST is typically included in the sale price. The seller (if registered for GST) is responsible for remitting this tax, but buyers may need to handle GST withholding obligations.
Commercial Properties – The purchase of commercial properties, such as office buildings, warehouses, or retail spaces, is usually subject to GST. However, some commercial property sales are classified as “GST-free” if they are sold as a going concern (such as an operating business with tenants in place).
Existing Residential Properties – Unlike new residential properties, the sale of established homes is generally exempt from GST. These transactions are considered “input-taxed,” meaning GST is not applied to the purchase price, and the seller cannot claim GST credits for related expenses.

Understanding how GST applies to different types of property transactions is crucial before making a purchase. The next section will explore whether buyers need to register for GST based on their intended use of the property and their business activities.

Do You Need to Register for GST When Buying Property?

Whether you need to register for GST when purchasing property in South Australia depends on the nature of your purchase and your involvement in business activities. In Australia, GST registration is mandatory for businesses with an annual turnover of $75,000 or more ($150,000 for not-for-profits). If you are buying property as an individual for personal use, such as a family home, you do not need to register for GST. However, if you are purchasing property as part of a business or investment strategy, GST registration may be required.

When You Need to Register for GST

You may need to register for GST in the following scenarios:

Property Development or Subdivisions – If you purchase land with the intent of subdividing and selling lots or developing new residential or commercial properties for sale, you are conducting an enterprise. If your turnover from these sales is likely to exceed $75,000, you must register for GST.
Buying Commercial Property as a Business – If you purchase commercial property as part of a business that is GST-registered, you may need to be registered to claim GST credits.
Regular Property Flipping – If you frequently buy, renovate, and sell properties for profit, the ATO may classify you as conducting a business, requiring GST registration.

When You Do Not Need to Register for GST

Buying a Home to Live In – Purchasing an established residential property for personal use does not require GST registration.
Buying a Residential Investment Property – If you are purchasing a rental property, GST does not apply to rental income, meaning you are not required to register for GST.

Understanding whether you need GST registration before purchasing property can help you avoid unexpected tax obligations and ensure compliance with ATO regulations.

GST Withholding Obligations for Property Buyers

Since 1 July 2018, changes to Australian tax laws require certain property buyers to withhold and remit GST directly to the Australian Taxation Office (ATO) at settlement. This rule primarily applies to new residential properties and potential residential land but does not affect buyers of established residential homes.

When Do Buyers Need to Withhold GST?

If you are purchasing any of the following types of property, you may be required to withhold a portion of the purchase price and pay it directly to the ATO:

New Residential Premises – This includes newly constructed homes or significantly renovated properties that have never been lived in or sold before.
Vacant Residential Land in a New Subdivision – If you are buying land that has been subdivided from a larger parcel and is classified as “potential residential land,” GST may need to be withheld.

The GST amount to be withheld is usually 7% or 10% of the contract price, depending on the type of transaction. The seller must notify the buyer if GST withholding applies and specify the amount to be withheld.

Exemptions from GST Withholding

Existing Residential Properties – Buying an established home does not attract GST withholding.
Commercial Property Sales – If a commercial property is sold as a “going concern,” it is GST-free, and no withholding is required.

Buyers must ensure they fulfil their withholding obligations to avoid penalties and ensure compliance with ATO requirements. Consulting a tax professional before purchasing can help clarify any GST implications for your transaction.

Claiming GST Credits on Property Purchases

If you are registered for GST and purchase a property for business purposes, you may be eligible to claim GST credits on the transaction. This allows you to recover the GST paid as part of the purchase price, reducing your overall tax liability. However, there are strict eligibility criteria and specific conditions that determine whether you can claim these credits.

Who Can Claim GST Credits?

You can claim GST credits if:

You are registered for GST at the time of the property purchase.
The property is being used in the course of a business or enterprise that is also GST-registered.
You receive a valid tax invoice from the seller, which itemises the GST component.
The sale is not made under the margin scheme (explained below).

For example, if you purchase a commercial property and intend to lease it to GST-registered tenants, you may be entitled to claim back the GST on your purchase. Similarly, if you buy vacant land to develop and sell as new residential property, you can usually claim GST credits on development costs.

When Can’t You Claim GST Credits?

If the property was sold under the margin scheme – This is a special GST calculation method where GST is only applied to the profit margin, rather than the full sale price. Buyers cannot claim GST credits on these transactions.
If purchasing an existing residential property – The sale of existing homes is input-taxed, meaning GST does not apply and credits cannot be claimed.
If you are not using the property for business purposes – Buying property for personal use or for renting out as a residential investment does not allow for GST credit claims.

Understanding GST credits before purchasing can help you optimise your tax position and avoid unexpected costs. Always consult a tax professional to ensure you are compliant with GST regulations.

The Margin Scheme and How It Affects GST on Property Purchases

The margin scheme is a special GST calculation method used in property transactions to determine the GST payable on a sale. Instead of applying GST to the full sale price, the margin scheme allows GST to be calculated only on the profit margin—the difference between the original purchase price and the sale price. This can significantly reduce the GST liability for property developers and investors.

When Is the Margin Scheme Used?

A seller (vendor) may choose to apply the margin scheme when selling a property if:

The property was not originally purchased as a fully taxable sale (i.e., it was acquired from an unregistered seller or under the margin scheme).
The sale is not a GST-free transaction (such as a sale of a going concern or farmland).
The buyer agrees to the margin scheme being applied.

Impact of the Margin Scheme on Buyers

Reduced GST Costs for the Seller – Sellers using the margin scheme only pay GST on the margin rather than the full sale price.
Buyers Cannot Claim GST Credits – If a property is sold under the margin scheme, the buyer cannot claim GST credits on the purchase, even if they are GST-registered.
Lower GST Impact on Development Projects – Property developers and investors often use the margin scheme to minimise GST costs when selling newly developed land or buildings.

Buyers should always check the contract and confirm whether the margin scheme applies before purchasing a property, as this affects their ability to claim GST credits. Seeking professional tax advice ensures you understand your GST obligations before finalising the purchase.

GST and Stamp Duty: Understanding the Differences

When purchasing property in South Australia, it’s important to understand the distinction between GST and stamp duty, as both can impact the total cost of a property transaction. While GST is a tax applied to certain property sales, stamp duty is a state government tax imposed on all property purchases, regardless of whether GST applies.

Key Differences Between GST and Stamp Duty

GST (Goods and Services Tax)
- Federal tax applied at 10% to specific property transactions, including new residential properties and commercial properties.
- Payable to the Australian Taxation Office (ATO) by the seller, though buyers may have withholding obligations.
- In some cases, buyers may be eligible to claim GST credits, depending on the nature of the purchase.
- Does not apply to existing residential properties or properties sold under the margin scheme.
Stamp Duty (Transfer Duty)
- State tax imposed on all property transactions in South Australia, calculated as a percentage of the purchase price.
- Payable to Revenue SA by the buyer at the time of settlement.
- Applies regardless of whether the property is new, existing, commercial, or residential.
- GST is included in the contract price before stamp duty is calculated, meaning stamp duty is applied to the GST-inclusive price.

How These Taxes Affect Buyers

When purchasing property, buyers should factor in both GST and stamp duty when budgeting. Stamp duty is unavoidable and must be paid upfront, whereas GST may or may not be applicable, depending on the type of property and transaction structure. Consulting a property tax professional ensures you understand your obligations and avoid unexpected costs during settlement.

GST Considerations for Property Investors

For property investors in South Australia, understanding how GST applies to different investment strategies is essential to making informed financial decisions. While most investment properties do not attract GST, there are some key scenarios where GST obligations may arise.

Buying Residential Investment Properties

If you purchase an existing residential property to rent out, GST does not apply to the purchase price or the rental income. Residential rental income is classified as input-taxed, meaning landlords cannot charge GST on rent or claim GST credits on property expenses, such as maintenance, property management fees, or repairs.

However, if you develop or substantially renovate a property and sell it, GST may apply. The ATO considers newly built homes taxable sales, meaning the sale price includes GST, and you may need to be registered for GST if your turnover exceeds $75,000 per year.

Buying Commercial Investment Properties

GST generally does apply to commercial property transactions unless the property is sold as a going concern (e.g., with an active tenant and lease agreement in place). If you buy a commercial property:

You may be able to claim GST credits on the purchase price and associated expenses.
If you lease the property to a GST-registered business, you must charge GST on rent and remit it to the ATO.

Short-Term Rental Properties (Airbnb, Holiday Homes)

If you rent out a property through platforms like Airbnb or Stayz and generate over $75,000 per year, you must register for GST. Unlike long-term residential leases, short-term rentals are considered a taxable supply, meaning GST applies to rental income.

For investors, GST can be a complex area, and seeking professional tax advice ensures compliance and maximises potential tax benefits.

Steps to Ensure GST Compliance When Buying Property

Navigating GST obligations when purchasing property in South Australia requires careful planning and awareness of tax laws. Whether you’re buying for personal use, investment, or business purposes, following these steps can help ensure compliance and avoid costly mistakes.

1. Determine Whether GST Applies to Your Purchase

Before buying a property, confirm whether GST is included in the purchase price. GST generally applies to:

New residential properties (including newly built homes and substantially renovated dwellings).
Commercial properties (unless sold as a going concern).
Vacant land intended for residential development.

If purchasing an existing residential home, GST typically does not apply.

2. Check Whether GST Withholding Obligations Apply

If you are buying a new residential property or potential residential land, you may be required to withhold and remit GST to the ATO at settlement. Ensure you receive proper notification from the seller and calculate the correct GST amount (usually 7% or 10% of the contract price).

3. Register for GST if Necessary

If you are purchasing a property as part of a business or property development project and expect your annual turnover to exceed $75,000, you must register for GST with the ATO. GST registration allows you to:

Claim GST credits on the property purchase and related expenses.
Charge GST on sales or rent (if applicable).

4. Consult a Tax Professional

GST laws can be complex, and errors can lead to penalties. Engaging a tax accountant or property lawyer ensures you meet all GST obligations, maximise potential tax benefits, and avoid unexpected costs.

By understanding these steps, property buyers can confidently navigate GST requirements and ensure a smooth purchasing process.

Common GST Mistakes to Avoid When Buying Property

When purchasing property in South Australia, failing to understand GST obligations can lead to unexpected tax liabilities, penalties, or lost financial opportunities. Here are some of the most common GST mistakes buyers should avoid.

1. Assuming GST Doesn’t Apply to the Purchase

Many buyers mistakenly believe that all property transactions are GST-free. While established residential properties are generally exempt, GST applies to new residential premises, commercial properties, and some vacant land. Always check the GST status of a property before purchasing to avoid unexpected costs.

2. Not Understanding GST Withholding Obligations

Since 1 July 2018, buyers of new residential properties and potential residential land must withhold and remit GST directly to the ATO at settlement. Some buyers overlook this requirement, leading to compliance issues. Sellers must inform buyers of their withholding obligations before settlement.

3. Failing to Register for GST When Required

If you are buying property as part of a business or development project, you must register for GST if your turnover is expected to exceed $75,000 per year. Failing to register can mean missing out on GST credits and incurring penalties from the ATO.

4. Overlooking the Impact of the Margin Scheme

If a property is sold under the margin scheme, buyers cannot claim GST credits on the purchase. Some investors assume they can recover GST on such transactions, leading to miscalculations in financial planning.

5. Not Seeking Professional Advice

GST laws regarding property transactions can be complex. Failing to consult a tax accountant or property lawyer can result in costly mistakes, including overpaying GST or missing out on potential tax benefits.

By avoiding these common pitfalls, buyers can ensure compliance with GST regulations and make informed property investment decisions.

Final Considerations Before Purchasing Property and GST Implications

Before finalising a property purchase in South Australia, it’s essential to take a comprehensive approach to understanding GST obligations. Whether you’re buying as an individual, investor, or business, considering these final factors can help you make an informed financial decision and avoid unnecessary tax burdens.

1. Review the Contract for GST Clauses

Always check whether the contract price includes or excludes GST. Some contracts specify that GST is payable on top of the agreed price, while others state that it is already incorporated. If GST is not mentioned, do not assume it doesn’t apply—always clarify with the seller or a legal professional.

2. Understand the Tax Consequences of Your Purchase

If you’re purchasing a home to live in, GST won’t apply.
If buying a new residential property, check whether GST withholding applies and ensure the correct amount is remitted to the ATO.
If investing in commercial property, understand whether GST credits can be claimed or if the sale is GST-free under the “going concern” exemption.

3. Plan for Other Tax Costs

Beyond GST, factor in stamp duty, land tax, and capital gains tax (CGT) if you intend to sell in the future. GST can impact depreciation schedules and tax deductions, especially for investors and businesses.

4. Seek Professional Guidance

GST laws can be complex, and misinterpretation can lead to penalties or financial loss. Consulting a tax accountant, conveyancer, or property lawyer before purchasing ensures compliance and maximises tax efficiency.

Taking these final considerations into account will help buyers avoid surprises and make confident, well-informed property purchases.

Making Informed Decisions About GST and Property Purchases

Understanding GST obligations when buying property in South Australia is crucial for avoiding unexpected costs and ensuring compliance with tax laws. While established residential properties are generally exempt from GST, new residential homes, commercial properties, and certain vacant land transactions may attract GST, requiring buyers to fulfil specific obligations.

For individual buyers purchasing a home to live in, GST is not a concern, and registration is unnecessary. However, for property investors, developers, and businesses, the situation is different. If you plan to develop, subdivide, or lease commercial property, you may need to register for GST and manage tax credits accordingly.

Buyers should also be aware of GST withholding rules, particularly when purchasing newly built residential properties. The responsibility of remitting GST to the ATO at settlement now lies with the buyer, making it essential to factor this into financial planning. Additionally, understanding the margin scheme can prevent miscalculations when GST credits cannot be claimed.

To ensure a smooth property transaction, always:

Review contracts carefully to check for GST inclusions.
Understand your GST obligations based on the property type.
Seek advice from a tax professional or conveyancer to avoid costly mistakes.

By taking a proactive approach and being fully informed, buyers can navigate GST complexities with confidence and make financially sound property purchases in South Australia.

Disclaimer

This article is intended for informational purposes only and does not constitute financial, legal, or tax advice. The content provided is general in nature and may not reflect the most up-to-date legal or tax regulations. GST laws and property tax obligations can vary depending on individual circumstances, property types, and business structures.

Readers should not rely solely on the information in this article when making property purchase decisions. We strongly recommend consulting a qualified tax professional, accountant, or legal expert to receive tailored advice based on your specific situation. The Australian Taxation Office (ATO) and Revenue SA provide official resources and guidance on GST and property transactions, which should be reviewed before proceeding with any purchase.

While every effort has been made to ensure the accuracy of this article, Broadland Estates and the author accept no responsibility for any loss or liability incurred as a result of using or relying on this information. Always seek independent professional advice to ensure compliance with Australian tax laws.