GST and Commercial Property Sales: Understanding Going Concern Exemptions

This article explains how GST applies to the sale of commercial real estate and what elements are required for a going concern sale. Our insights are based on our experience as commercial real estate agents, advice from accountants and solicitors, and the practical impacts on buyers and sellers.

Is GST Applicable to the Sale of Commercial Property?

In Australia, Goods & Services Tax (GST) generally applies to the sale of commercial property if the seller is registered or required to be registered for GST. However, GST may not apply in specific cases, such as:

• When the seller is not required to be registered for GST.
• If the sale qualifies as a going concern (discussed below).

Is GST Included in the Commercial Property Sale Price?

Agents typically communicate commercial property sale prices as GST exclusive amounts. This ensures consistency, as the stated price remains the same regardless of whether GST applies.

REIQ contracts have dedicated sections specifying whether the contract price is:

• Exclusive or inclusive of GST, or
• Part of a going concern sale (GST-free).

Important Note: Queensland Valuation and Sales (QVAS) publishes sale price data as GST-inclusive figures, without specifying if GST was applied. When researching commercial property prices, keep in mind that quoted figures may be 10% higher than GST-exclusive contract prices.

When Must a Seller Register for GST?

At the time of writting if a seller’s annual gross revenue exceeds $75,000 (excluding GST), they are likely required to register for GST. Most commercial property owners are GST-registered due to the business structures involved, but in some cases, a seller may not be required to collect GST.

GST-Free Sales: What Qualifies as a Going Concern?

A sale qualifies as a going concern (GST-free) if the property is sold with a lease in place at the time of settlement and meets ATO requirements. To be eligible:

The seller is registered or required to be registered for GST.
The buyer is registered or required to be registered for GST.
The property is fully leased at settlement OR, if partially leased, the vacant portion is advertised for lease or being renovated for leasing.
The seller, buyer, and tenant are separate legal entities.
The contract explicitly states the sale is a going concern.

ATO Definition of a Going Concern Sale

“You are selling a ‘going concern’ if the:

• sale includes everything that’s necessary for the continued operation of the business
• business is carried on by you until the day of sale.

Property that’s part of a sale of a going concern can include any of the following:

• the business property, when sold together with the assets and operating structure of the business
• a fully tenanted building, where the property and all leases, agreements and covenants are included in the sale
• a partially tenanted building, where
  • the vacant part of the building is either actively marketed for lease or undergoing repairs or refurbishment
  • all leases, agreements and covenants are included in the sale.

The sale of a property by itself isn’t regarded as a going concern.”

Source: ATO - Selling a going concern

Benefits of a GST-Free Sale for Buyers & Sellers

A going concern sale can provide significant financial advantages, including:

Lower upfront costs for buyers – Buyers don’t need to secure extra funds to pay GST, which can improve affordability and cash flow.
Reduced stamp duty costs – In Queensland, stamp duty applies to the GST-inclusive price, meaning a GST-free sale lowers stamp duty expenses.
Higher sale prices – GST-free transactions can attract higher offers, as buyers avoid GST-related financing and stamp duty costs.

Do Buyers Need to Register for GST?

Most commercial property buyers prefer to be registered for GST because:

• It allows them to claim back GST paid in their Business Activity Statement (BAS).
• It enables them to qualify for a GST-free going concern sale when the necessary conditions are met.

We recommend discussing this with your accountant before purchasing.

Which Party Is Responsible for GST Obligations?

The seller is legally responsible for collecting and remitting GST. The buyer is then responsible for payment. Both buyers and sellers should obtain independant advice from an accountant and solicitor.

Expert Advice is Essential

Consult an accountant early to confirm your GST obligations and potential benefits of a going concern sale.
Engage a solicitor to review legal agreements and ensure compliance with GST laws.
Work with experienced real estate agents to navigate GST implications and secure the best outcome.

Other GST Issues Relating to Commercial Property

For more insights, check out our related articles:

• Do Leasing Bonds Include GST?
• Should I Manage My Own Commercial Property?

Final Note

This article provides general guidance on GST and commercial property sales. It is not intended as legal or financial advice. Buyers and sellers should obtain independent professional advice before making decisions.

© Crew Commercial Property Pty Ltd. Author: Josh Wright.

Need Expert Advice?

Whether you’re buying or selling, our team at Crew Commercial can help you navigate GST requirements. Contact us today to discuss your property transaction!