GST is a value added tax on each stage of production or delivery of goods and services to the consumer. In a pure GST system, the end consumer is meant to bear the liability of the GST but in practice this is not always the case.

Each supply of goods and services along the production or delivery line will need to be categorised as either:

• a taxable supply;

• a GST-free supply;

• an input taxed supply; or

• an out-of-scope supply.

Generally, the five key questions to determine the GST consequences of a property transaction are:

• In the event that the person is not GST registered, is the person carrying on an enterprise such that they are required to be registered for GST?

If the person is not required to be registered, then no GST consequences arise.

• If the person is registered or required to be registered, then is the transaction part of the enterprise that the person carries on?

If the transaction is not part of the enterprise, then no GST consequences arise. For example, the sale of a vacant block of land that was to be used as a holiday home by a sole trader carrying on a business as a plumber would not be part of his enterprise. However, the sale of his business premises would.

• Do any of the concessions provided to residential property, farm land and land being used in a going concern apply?

  If any of the concessions apply, then no GST will be payable, but there may be certain restrictions on claiming any GST paid.

If any of the concessions apply, then no GST will be payable, but there may be certain restrictions on claiming any GST paid on acquisitions relating to the property.

• If no concession applies and GST is payable, is the property transaction eligible for the margin scheme?

• When is the GST payable on the property supply?

See Checklist — Determining the GST consequences of a property transaction. See also GST special rules.

The main difficulties a practitioner faces in assessing the GST consequences of a property transaction are:

• whether the vendor is carrying on an enterprise. The central debate in relation to this issue runs along similar lines to the long-standing issue in income tax law, which is whether a person is carrying out a profit-making scheme or merely realising a capital asset; and

• whether the property transaction meets the particular conditions of any statutory GST concession available. Much of the problems encountered in this respect derive from ambiguous drafting of the legislative provisions in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) and from untested interpretations adopted by the Australian Taxation Office (ATO).

Where the supply is a taxable supply, each supplier is not meant to bear the cost of any GST and the liability for the GST is intended to ultimately fall on the end consumer. This is achieved by each supplier including or adding an extra amount as GST to the price when they make a supply and the recipient being entitled to a credit (called an input tax credit) for any GST included in the price paid by them.

See Taxable supplies.

Where the supply is a GST-free supply, then each supplier as well as the end consumer is not meant to bear the cost of any GST. This is achieved by each supplier not being subject to GST when they make a supply but also being entitled to an input tax credit for any GST paid by them on acquisitions they make relating to those supplies.

See GST-free supplies.

Where the supply is an input taxed supply, then the supplier partly bears the burden of the tax. This is achieved by the supplier not being subject to GST on any supply they make, but they are also not allowed to claim (or allowed to only partly claim) an input tax credit for any GST paid by them on acquisitions used to make the input taxed supply.

See Input taxed supplies.

The general rules for the timing of payment of GST are amended for certain property transactions. These special rules relate particularly to where a deposit has been received and where progressive payments are received in respect of leases or building payments.

See GST special rules.

Sales of different types of property may be categorised as either a taxable supply, a GST-free supply, an input taxed supply or an out-of-scope supply depending on various factors including the nature of the property and the status of the vendor and purchaser.

Where the supply is a taxable supply and GST is payable, then in certain situations the GST payable may be able to be reduced if the parties qualify for and choose to apply the GST margin scheme.

See GST and sales.

Certain choices need to be made in relation to the GST treatment of the sale of every property to ensure the right GST outcome is achieved. These choices must be made on the front page of the Law Society of NSW — Contract for sale of land — 2017 edition.

The Law Society of NSW — Contract for sale of land — 2018 edition includes standard cl 13 dealing with GST. There are certain aspects of the standard clause that may not be appropriate in all circumstances. As such, there are numerous instances when the standard clause should be amended. The 2018 edition of the Contract for Sale and Purchase of Land has been amended as a consequence of the introduction of the GST residential withholding regime in Treasury Laws Amendment (2018 Measures No 1) Act 2018 (Cth).

See GST and the contract for the sale of land.

The leasing of property is generally categorised as either a taxable supply or an input taxed supply. For policy reasons however, certain concessions are provided to the provision of some long-term accommodation.

See GST and leases.

Mortgages are input taxed as a financial supply and as such, borrowers do not need to be concerned about GST. There are, however, complications for lenders relating to not always being able to claim all GST paid by them on acquisitions relating to lending activities.

See GST and mortgages.

There are some special provisions in the GST legislation dealing with options. For example, s 9-17(1) of the GST Act provides that, if a right or option to acquire a thing is granted, then:

• the consideration for the supply of the thing on the exercise of the right or option is limited to any additional consideration provided either for the supply or in connection with the exercise of the right or option; or

• if there is no additional consideration, there is no consideration for the supply.

Section 9-30 also provides that, if an option is a right to receive a supply that would be GST-free, then the supply of the option is itself GST-free.

See GST and options.