GST and commercial property in QLD: what buyers and sellers need to know

GST is the bit of a commercial deal that quietly decides whether the price you agreed is the price you pay. Get it right and it’s a non-event. Get it wrong and someone’s suddenly 10% out of pocket – or arguing with the ATO. Unlike buying a home, where GST rarely comes up, commercial property almost always puts it on the table. Here’s how it works, minus the accountant-speak.

TLDR

• GST usually applies to commercial property sales – unlike most residential sales, where it doesn’t.
• The contract must state clearly whether the price is “plus GST” or “inclusive of GST”. Vague wording is where fights start.
• Many leased commercial sales can be GST-free as a “going concern” if both parties are registered for GST and the contract says so.
• The “margin scheme” is another way GST can be calculated – it can reduce the GST on some sales, but both sides need to agree to it in the contract.
• This is NOT the same as residential GST withholding (a separate rule for new homes and land).
• Get your solicitor and accountant talking early. Call Empire Legal on 07 3088 7675.

Why GST shows up on commercial but not your home

When you buy an established home to live in, the sale is generally “input taxed” – no GST. Commercial property is different. Selling commercial premises is usually a taxable supply, so GST of 10% is in the mix.

That single fact reshapes the deal. The headline price might be “plus GST”, meaning you pay an extra 10% on top. Or it might be “GST inclusive”, meaning it’s baked in. Buyers who skim past this clause can get a nasty shock at settlement when the figure is 10% higher than they budgeted.

“Plus GST” vs “inclusive” – read this clause carefully

The contract has to nail down how GST is treated. “Plus GST” and “inclusive of GST” are very different numbers on a $1 million purchase – we’re talking $100,000. If a buyer is registered for GST and using the property for their business, they can often claim the GST back as a credit, which softens the blow. If not, that 10% is a real cost. Either way, the contract wording is what governs it, so this is not the clause to skim.

The “going concern” exemption

Here’s the one that genuinely saves money. Where a property is sold with an operating lease or business in place – so the buyer can keep running it – the sale can qualify as the sale of a “going concern” and be GST-free.

It’s not automatic. To qualify, generally both the buyer and seller need to be registered for GST, the contract must state in writing that it’s a going concern, and the seller has to supply everything needed for the operation to continue. Tick those boxes and no GST changes hands. Miss one – say the buyer isn’t registered in time – and the going-concern treatment can fail, dropping a 10% bill into the deal. The paperwork and timing really matter.

The margin scheme, briefly

There’s also the “margin scheme”, a different way of working out the GST on some sales (often where the property was bought before GST existed or under specific conditions). It can reduce the GST payable, but both parties have to agree to it in writing in the contract, and it affects the buyer’s ability to claim credits. Whether it helps depends on your circumstances – one for your accountant and solicitor to weigh up together.

Don’t confuse it with residential GST withholding

Quick myth-bust. You might have heard of “GST withholding” on property. That’s a separate rule that mainly applies to buyers of new residential premises and certain land – where the buyer pays part of the price straight to the ATO. It’s not the same as GST on a commercial sale. We cover that one separately in our GST withholding guide, so you don’t mix the two up.

The bottom line

GST on commercial property isn’t scary once it’s set up properly – it’s just one of those things you cannot afford to leave to chance or to a vague contract clause. Sort the GST position before you sign, make sure the contract spells it out, and get your solicitor and accountant on the same page early. That’s how a 10% surprise becomes a non-issue.

Frequently asked questions

Do you pay GST on commercial property in Australia? Usually yes. Commercial property sales are generally taxable supplies, so 10% GST applies – unlike most established residential sales, which don’t attract GST. The contract must state how GST is handled.

What does “plus GST” mean in a commercial contract? It means GST of 10% is added on top of the stated price. “Inclusive of GST” means it’s already built into the price. The two produce very different final figures, so check which one your contract uses.

Can I claim back the GST on a commercial purchase? Often, if you’re registered for GST and using the property for your business, you can claim the GST as an input tax credit. If you’re not registered, the GST is generally a real cost. Confirm your position with your accountant.

What is a “going concern” and is it GST-free? A going concern is generally a property sold with its lease or operating business in place so it can keep running. If both parties are GST-registered and the contract states it’s a going concern, the sale can be GST-free. The requirements must be met exactly.

What is the margin scheme? It’s an alternative method of calculating GST on some property sales that can reduce the GST payable. Both parties must agree to it in writing in the contract, and it can affect the buyer’s ability to claim GST credits.

Is GST on commercial property the same as GST withholding? No. GST withholding mainly applies to buyers of new residential premises and certain land, who remit part of the price to the ATO. GST on a commercial sale is a separate matter. Don’t confuse the two.

Who works out the GST on my commercial deal? It’s a team effort between your solicitor (who gets the contract wording right) and your accountant (who advises on registration, credits and the best structure). Empire Legal coordinates the legal side and works with your accountant.

How Empire Legal helps

We make sure the GST position on your commercial purchase or sale is correct before you sign – the right wording, the going-concern requirements met where they apply, and your accountant looped in. No vague clauses, no 10% surprises at settlement.

Call 07 3088 7675 or email info@empirelegal.com.au, Monday to Friday, 9am-5pm. See our commercial conveyancing service.

This article is general information only and isn’t legal, financial or tax advice. GST is complex – always get advice tailored to your situation.