The GST Margin Scheme Explained for Property Sales in Australia 2026
The GST margin scheme is a legally approved method that allows property developers and investors to significantly reduce their GST liability on property sales in Australia. Here's exactly how it works and when to use it.
What is the GST Margin Scheme?
The GST margin scheme is an optional method of calculating GST on property sales in Australia. Instead of paying GST on the full sale price, you only pay GST on the margin โ the difference between what you paid for the property and what you sell it for. This is often significantly less than the standard GST calculation.
How GST Normally Works on Property Sales
Under the standard GST method, GST is calculated on the full sale price of a new property:
Sale Price (inc GST): $1,100,000
GST = Sale Price รท 11: $100,000
Ex-GST amount: $1,000,000
How the Margin Scheme Works
Under the margin scheme, GST is calculated only on the profit margin โ the increase in value:
Sale Price: $1,100,000
Purchase Price: $500,000
Margin: $600,000
GST = Margin ร (10/110): $54,545
Who Can Use the GST Margin Scheme?
The margin scheme is available for:
- Sales of new residential premises (not previously sold as residential property)
- Sales of vacant land that is a taxable supply
- Sales of subdivided land by the original landowner
- Commercial property sales in some circumstances
The margin scheme is NOT available if:
- The property was purchased from a seller who was NOT registered for GST
- The property was acquired for no consideration (gift)
- The property is an input-taxed supply (e.g. existing residential property)
Calculating GST Under the Margin Scheme โ Full Example
| Item | Amount |
|---|---|
| Sale price of new dwelling | $850,000 |
| Original purchase price of land | $350,000 |
| Construction costs (not included in margin) | Varies |
| Margin (Sale โ Purchase) | $500,000 |
| GST payable (Margin ร 10/110) | $45,454.55 |
| Standard GST (if not using margin scheme) | $77,272.73 |
| Saving from margin scheme | $31,818.18 |
The Written Agreement โ What Must It Say?
The margin scheme election must be documented before or at settlement. The contract of sale should include wording such as:
"The parties agree that the margin scheme
applies to this supply pursuant to Division 75
of the A New Tax System (Goods and Services Tax)
Act 1999."
Always have a solicitor or conveyancer include this clause if you intend to use the margin scheme. Without this written agreement, the standard GST method applies automatically.
Real-World Examples
The margin scheme is a legitimate and ATO-approved method that can dramatically reduce GST liability for property developers. However, the rules are complex and fact-specific. Always engage a qualified tax advisor before applying the margin scheme to ensure compliance and maximise your savings.
The GST margin scheme lets property developers pay GST only on their profit margin rather than the full sale price โ often saving tens of thousands of dollars. It requires a written agreement in the contract before settlement, and can only be used in specific circumstances. Always consult a property tax specialist before using it.