If you buy a meal, groceries, petrol, and so forth, GST of 10% is included in the price. In fact, the prices of consumer items must include GST, by law.
With real estate it's different. This is a quick guide:
- Second-hand residential property sales - houses, apartments, villas - no GST is payable
- New residential property sales - off the plan or newly completed - GST is payable by the vendor, and it is included in the price
- Commercial property sales - shops, warehouses, offices - normally, no GST is payable if sold subject to lease, but GST is payable by the purchaser if sold vacant
- Land sales - farms, vacant land, acreage - GST may or may not be payable by the purchaser depending on whether used for farming, whether sold in the course of an enterprise, or whether the vendor is or needs to be registered for GST
As you can see, when buying commercial real estate, knowing whether the price is treated as GST inclusive or GST exclusive is essential.
Otherwise, as purchaser you may receive a nasty surprise and need to find another 10% on top of the price to pay the GST. This cash outlay for the GST will need to be carried until the next BAS statement is lodged, and a credit is claimed. Also, to add insult to injury, extra stamp duty is payable on the GST.
The GST treatment needs to be properly covered in the Contract for Sale.
If not, a dispute may arise which goes to Supreme Court to decide whether the price was inclusive or exclusive of GST. To see what happened in a recent case, click my article -