Guide to Selling Commercial Property & GST
Selling a commercial property as a going concern, understanding GST on stamp duty, GST on house sales, and GST on the sale of new residential premises can be complex but crucial for property investors and business owners. Sunstate Conveyancing is here to guide you through these processes, ensuring you have the knowledge and support needed to navigate these transactions successfully.
Selling Commercial Property as a Going Concern
What Does “Going Concern” Mean?
A “going concern” refers to a business that is operating and has the potential to continue operating into the foreseeable future. When selling commercial property as a going concern, the business must continue its operations without interruption, and the buyer must take over the property and the business as an integrated whole.
Criteria for Selling a Property as a Going Concern
To qualify for GST exemption on the sale of a going concern, several conditions must be met:
Continuity of Business: The business must be operational up until the day of sale.
Supply of All Necessary Components: The sale must include everything necessary for the continued operation of the business, such as equipment, fixtures, fittings, and goodwill.
Agreement in Writing: Both the buyer and the seller must agree in writing that the sale is of a going concern.
Registered for GST: Both parties must be registered for GST at the time of the transaction.
GST on Stamp Duty
Do You Pay GST on Stamp Duty?
In Queensland, GST does not apply to stamp duty. Stamp duty is a state tax imposed on certain transactions, including the transfer of property. The amount of stamp duty payable depends on the property’s value and the nature of the transaction. Since GST is a federal tax and stamp duty is a state tax, they are calculated separately.
GST on House Sales
When is GST Payable on a House Sale?
GST is generally not payable on the sale of existing residential properties as these are considered “input taxed” supplies. However, GST is payable on the sale of new residential premises and certain commercial properties.
Sale of New Residential Premises and GST
What Constitutes New Residential Premises?
New residential premises are defined as:
Recently Constructed: Properties that have not been sold as residential premises before or have been created through substantial renovations.
Vacant Land with a Building Agreement: Land sold with a building contract to construct a new residential property.
Commercial Residential Premises: Includes properties used for short-term accommodation like hotels and motels.
GST on Sale of New Residential Premises
GST is payable on the sale of new residential premises unless the sale is part of a GST-free going concern transaction. The GST rate is typically 10% of the sale price.
FAQs About Selling Commercial Property and Understanding GST in Property Transactions
What is the benefit of selling a commercial property as a going concern?
The primary benefit is the GST exemption, which can make the transaction more attractive to buyers and potentially simplify the sale process.
Do you pay GST on stamp duty when buying a property in QLD?
No, GST does not apply to stamp duty in Queensland as it is a state tax, while GST is a federal tax.
Is GST payable on the sale of an existing residential property?
No, GST is generally not payable on the sale of existing residential properties as they are considered “input taxed” supplies.
When is GST payable on the sale of a house?
GST is payable on the sale of new residential premises, which includes newly constructed properties and those that have undergone substantial renovations.
Can I claim GST credits on the purchase of a commercial property?
Yes, if the property is being used in a business that is registered for GST, you may be able to claim GST credits on the purchase.
What constitutes a “new residential premise”?
New residential premises are properties that have not been sold as residential before, have been substantially renovated, or include vacant land sold with a building agreement.
How do I ensure my commercial property sale qualifies as a going concern?
Ensure the business is operational until the day of sale, include all necessary components for continued operation, have a written agreement, and ensure both parties are registered for GST.
Are there any exemptions to GST on the sale of new residential premises?
Yes, if the sale is part of a GST-free going concern transaction or meets other specific exemptions outlined by the ATO.
How is GST calculated on the sale of new residential premises?
GST is typically 10% of the sale price of the new residential premises.
What documentation is needed for a going concern transaction?
You will need a written agreement between the buyer and seller, confirmation of GST registration for both parties, and detailed records of all components included in the sale.
Navigating the complexities of selling commercial property as a going concern, understanding GST on stamp duty, GST on house sales, and the sale of new residential premises requires careful consideration and expert guidance. Sunstate Conveyancing provides the support and knowledge needed to ensure your transactions are compliant and successful. Whether you’re a property investor, business owner, or homebuyer, understanding these aspects can save you time, money, and potential legal issues.
This is general advice only, for specific legal advice speak with your legal representative.
