Generally, you pay the normal GST rate of one-eleventh of a property's sale price.

However, if you're eligible, you can work out your GST liability using the margin scheme. Under the margin scheme you pay one-eleventh of the margin for the sale of the property, rather than one-eleventh of the total sale price.

If you sell residential premises or potential residential land:
• you may be required to notify your purchaser in writing (before settlement) whether or not they are required to withhold GST from the contract price and pay this directly to ATO
• you are still required to report the sale on your business activity statement.

Example: Using the consideration method for property purchased on or after 1 July 2000

Matt is a GST registered builder. On 1 December 2002, Matt purchased a block of land for $150,000 from a vendor who was not registered for GST.

Matt paid $550 in conveyancing fees and $7,000 in stamp duty on the purchase of the land.
Matt later constructed a house on the land and sold the house and land for $315,000. Matt chose to use the margin scheme to work out the GST on the sale.

The margin for the sale of the house and land package is $165,000, for example, the sale price of the property minus the purchase price of the property ($315,000 − $150,000).

The GST Matt must pay on the margin for the sale is $15,000 ($165,000 × 1/11th).

Matt has a tax invoice for the conveyancing fees and can claim a GST credit of $50 ($550 × 1/11th) in the tax period to which the purchase applies.

Matt also holds tax invoices for $110,000 of business purchases he made when building the house. Matt is able to claim $10,000 in GST credits for these purchases.

Matt is not entitled to any GST credits on the stamp duty as GST is not included in the cost.