RBizz Corporate Accountants - Resources #GST

The GST Margin Scheme: How It Reduces GST on Property Sales (and the Condition That's Easy to Miss)

Mon, 17 Aug 2026 16:17:48 +1000

The GST Margin Scheme: How It Reduces GST on Property Sales (and the Condition That's Easy to Miss)

When selling new residential premises or subdivided land, GST is normally payable on the full sale price. The margin scheme offers an alternative: GST is calculated only on the margin — broadly, the difference between the sale price and the original purchase price (or valuation, in some cases) — rather than on the full transaction value. Used correctly, this can significantly reduce the GST payable. Used incorrectly, or without the right agreement in place, the standard full-price GST treatment applies instead, with no ability to fix it after settlement.

How the Margin Is Actually Calculated

In its simplest form, the margin is calculated as:

Sale price − Original purchase price (or an approved valuation, for property held before GST began or acquired GST-free) = Margin

GST is then calculated on that margin, rather than on the full sale price. For a property with a large embedded gain, this can produce a meaningfully lower GST liability compared to applying standard GST to the entire sale price.

The Critical Condition Most People Miss

The margin scheme must be agreed to in writing between buyer and seller, before or at settlement. This isn't a default treatment you can apply retrospectively, and it isn't something the seller can simply choose unilaterally without the buyer's agreement.

If this written agreement isn't properly in place at the right time, the standard GST treatment applies to the full sale price — and this cannot be corrected after settlement has occurred. Unlike some tax elections that can be fixed through an amendment, a missed margin scheme agreement is not something you can go back and apply retroactively once the sale is complete.

When the Margin Scheme Isn't Available at All

The margin scheme can't be used in every situation. It's generally not available where:

The property was originally purchased as a fully taxable supply where the seller was entitled to claim the full GST credit on acquisition, and the margin scheme wasn't used on that original purchase (subject to specific rules around this).
The sale is between associated entities for a price below market value, in certain circumstances, without a proper valuation being used.

Because the availability of the margin scheme depends on the property's specific acquisition history — not just the current sale — this needs to be checked property-by-property, not assumed based on general practice.

Where Property Sellers Commonly Get This Wrong

Assuming the margin scheme applies automatically to any property sale, without checking eligibility based on how the property was originally acquired.

Not documenting the written agreement properly, or leaving it until after settlement has already occurred, at which point it's too late to apply.

Using an incorrect valuation date or method for properties requiring a valuation-based margin calculation (rather than an original purchase price), which can understate or overstate the margin incorrectly.

Overlooking the interaction with going concern treatment, since a property sale might separately qualify for going concern GST-free treatment, which is a different mechanism entirely from the margin scheme, and the two shouldn't be confused or assumed to apply together without checking each independently.

What to Check Before Your Next Property Sale

Confirm the margin scheme is actually available for this specific property, based on its acquisition history — not just general assumption.

Get the written agreement between buyer and seller in place well before settlement, not as a last-minute addition to the contract.

Confirm the correct valuation method and date if the margin calculation relies on a valuation rather than an original purchase price.

Check whether going concern GST-free treatment might apply instead, since this is a separate consideration from the margin scheme and needs its own assessment.

Get the GST treatment confirmed by a tax adviser before contracts are exchanged, since this is one of the clearest examples in tax law where a missed procedural step (the written agreement) cannot be corrected after the fact.

Confirm Eligibility and Documentation Before You Sign

Given that a missed written agreement locks in the standard, more expensive GST treatment with no way to correct it later, it's worth confirming margin scheme eligibility and documentation well before contracts are exchanged on a property sale.

RBizz reviews property transactions to confirm margin scheme eligibility and ensures the required written agreement is properly documented before settlement — get in touch before your next property sale.

GST-Free Sale of a Business as a Going Concern: The Conditions That Actually Need to Be Met

Thu, 13 Aug 2026 16:51:29 +1000

GST-Free Sale of a Business as a Going Concern: The Conditions That Actually Need to Be Met

Selling a business can potentially be treated as GST-free under the "supply of a going concern" provisions — meaning no GST is charged on the sale price at all. This is a significant cash flow advantage for both parties (the buyer doesn't need to fund the GST upfront, even though they'd normally claim it back eventually). But this treatment only applies if specific conditions are met, and getting even one wrong means the sale is treated as a standard taxable supply, with GST applying to the full price.

What "Going Concern" Actually Means Here

A going concern supply broadly means the sale includes everything necessary for the purchaser to continue operating the business, not just a collection of individual assets. The legal test focuses on whether the seller supplies to the buyer all the things necessary for the continued operation of the business, and the seller carries on the business until the day of the sale.

The Conditions That Must All Be Met

1. Both parties must be registered for GST. If either the seller or the buyer isn't GST-registered at the time of the sale, the going concern treatment isn't available, regardless of how the rest of the transaction is structured.

2. The sale must be for consideration. This needs to be a genuine sale for payment — not a gift or a nominal transfer.

3. The buyer must be registered or required to be registered for GST. This overlaps with the first condition but is worth stating separately: it's specifically the buyer's registration status that matters here, not just their general involvement in business.

4. The parties must agree in writing that the supply is of a going concern. This isn't optional or implied — it needs to be an explicit written agreement between buyer and seller confirming the going concern treatment is intended to apply. This is commonly addressed directly in the sale contract itself, but needs specific wording, not just a general reference to the sale.

5. The seller must supply all things necessary for the continued operation of the business. This is the most fact-dependent condition, and where sales most commonly fail the test. If the seller retains a key asset, contract, or right that's genuinely necessary for the business to keep operating (for example, retaining a critical piece of equipment, a key supplier agreement, or specific intellectual property essential to the business), the "all things necessary" test may not be satisfied.

6. The seller must carry on the business until the day of the sale. If the seller has already wound down, ceased trading, or materially changed the business before the sale completes, this condition can be jeopardised.

Where Sales Commonly Fail This Test

Excluding a "necessary" asset from the sale, such as a lease the seller wants to keep, a piece of equipment retained for another purpose, or specific contracts not assigned to the buyer — even where this seems like a minor exclusion to the parties involved.

Incomplete or vague written agreement wording, where the contract doesn't clearly and specifically state the parties agree the supply is of a going concern.

A gap between ceasing to trade and completing the sale, where the business effectively stopped operating before settlement, undermining the "carry on until the day of sale" condition.

One party's GST registration lapsing or not being active at the relevant time, which is worth checking specifically at the settlement date, not just assumed based on general registration history.

What Happens If the Conditions Aren't Met

If the going concern conditions aren't satisfied, the sale is treated as a standard taxable supply — meaning GST applies to the full sale price. This has real financial consequences: the seller needs to remit GST on the sale (even if it wasn't factored into the negotiated price), and the buyer needs to fund that GST upfront, only claiming it back as a credit later, creating a cash flow gap in the transaction that wasn't originally planned for.

What to Check Before Finalising a Business Sale

Confirm both parties are currently registered for GST, checked specifically as of the settlement date, not just at the time of negotiation.

Identify everything genuinely necessary for the business to continue operating, and ensure all of it is included in the sale — nothing critical retained by the seller.

Include specific, clear written agreement in the sale contract that the supply is intended to be treated as a going concern — don't rely on general contract language.

Confirm the business continues trading normally right up until settlement, avoiding an operational gap before the sale completes.

Get the GST treatment confirmed by a tax adviser before signing, since correcting a mistaken assumption after settlement is considerably more complicated than confirming it beforehand.

Don't Assume Going Concern Treatment Applies — Confirm It

Given how much difference this makes to the cash flow of a transaction, it's worth having the specific conditions checked against your actual sale structure before contracts are signed, not after.

RBizz reviews business sale structures to confirm going concern GST treatment applies before settlement — get in touch before you finalise your next transaction.