If you are buying a brand-new house, apartment or a block of residential land, part of the price does not go to the seller. It goes to the ATO, from you, on settlement day. Most buyers find this out from their conveyancer a week before settlement. It is worth understanding earlier, because it changes the cash you need at settlement, and if you are the one selling, it changes how the GST lands on your BAS.
What GST at settlement is
Since 1 July 2018, a buyer of new residential premises or potential residential land withholds the GST component of the price and pays it straight to the ATO at settlement, paying the seller only the balance. The measure exists because some developers were collecting GST in the price, then liquidating before the BAS was lodged. Making the buyer pay the ATO directly closed that gap. The ATO confirmed the rules unchanged in its guidance updated on 14 October 2026.
How much is withheld
- 1/11th of the contract price for a normal taxable sale.
- 7% of the contract price where the seller is using the margin scheme.
- 10% of the GST-exclusive market value for certain sales between associates at less than market value.
The amount is rounded down to the nearest dollar and calculated on the price after any rebate or pre-settlement adjustment, but ignoring ordinary settlement adjustments such as council and water rates. On a $900,000 new apartment with no margin scheme, the buyer pays $81,818 to the ATO and $818,182 (less the deposit) to the developer.
Which properties it covers, and which it does not
Included: new houses, apartments and villas never sold before; house-and-land packages; off-the-plan purchases; display homes; and vacant land that can be built on for residential use, including subdivided lots.
Excluded: established homes (input-taxed, so no GST at all); premises made “new” only by substantial renovation; new premises that have been rented continuously for five years or more; commercial property; commercial residential premises such as hotels and caravan parks; and potential residential land bought by a GST-registered business for a creditable purpose, such as a developer buying land to build on. Selling your own family home is not caught.
If you are the buyer: three things to do
1. Get the supplier notification in writing. The seller must tell you, before settlement, whether you have to withhold and how much. Every state’s standard contract except the Northern Territory’s now has a section for it. If the contract says no withholding applies and you have reasonably relied on that, you are protected from penalty, unless you know the seller is a GST-registered developer selling a never-sold new home, in which case the ATO says it is unreasonable not to withhold.
2. Lodge Form one (GST property settlement withholding notification) any time after the contract is signed. It gives you a payment reference number and a lodgment reference number. Keep both. Your conveyancer or solicitor can lodge it for you with a signed authority.
3. Lodge Form two (settlement date confirmation) within two business days before settlement, on the day, or the next business day. Then pay the withheld amount quoting the payment reference number. For an instalment contract the payment is due with the first instalment after the deposit, not at final settlement.
You do not need to register for GST because you have a withholding obligation. Buying as tenants in common, each buyer withholds their share; as joint tenants, you are jointly responsible for the whole amount. Miss the forms and the failure-to-lodge penalty accrues per 28-day period; fail to withhold at all and the penalty equals the amount you should have paid.
If you are the seller: the notice and the BAS
If you are the supplier (a developer, a builder selling a spec home, a business subdividing a block) you must give the written notification whether or not withholding applies. Failing to do so is a strict-liability offence of up to 100 penalty units. The notice has to state every supplier’s name and ABN, the withholding amount, when it is payable and the GST-inclusive price.
Then on your BAS, for the period in which settlement occurred, report the full sale price at G1 and the GST on the sale at 1A, the normal way, as if the buyer had paid you everything. Do not reduce 1A by the withholding. The amount the buyer paid the ATO sits in your GST property credits account and transfers into your activity statement account when you lodge, usually within two business days. If the credit has not appeared within two weeks of settlement, a missing-credit request fixes it.
Under the margin scheme the arithmetic diverges on purpose: the buyer withholds 7% of the price, but your actual GST is 1/11th of the margin. In the ATO’s own example, land bought for $500,000 and a house built and sold for $900,000, the buyer withholds $63,000, the seller’s GST is $36,363, and the seller receives a $26,637 refund when the BAS is processed. The margin scheme must be agreed in writing before settlement, and a buyer under the margin scheme cannot claim a GST credit on the purchase.
Buying through a company or trust
The withholding turns on what the property is and what you are doing with it, not on the buying entity. A company buying a new apartment to rent out residentially withholds like any other buyer. Residential rent is input-taxed, so there is no creditable purpose and no GST credit on the purchase either. A GST-registered entity buying vacant residential land to develop and sell is acquiring for a creditable purpose and does not withhold; it confirms that to the seller in writing or in the contract. Commercial property is outside this regime altogether. GST is paid to the seller in the ordinary way and, if you are registered and using the premises in your enterprise, claimed back on your BAS.
Two things that sit alongside
The ATO receives sale and transfer data from every state land-titles office and revenue agency, so a settlement that should have carried withholding is visible to it regardless. And GST at settlement is independent of the foreign resident capital gains withholding that applies to vendors without a clearance certificate. Neither takes priority over the other, and a clearance certificate does nothing for GST.
The settlement-day checklist
- Supplier notification in writing, stating the withholding amount (or that none applies).
- Form one lodged; payment and lodgment reference numbers kept.
- Form two lodged in the two-business-day window; withheld amount paid quoting the PRN.
- Seller: full price at G1 and GST at 1A on the settlement-period BAS; credit checked after lodgement.
- Margin scheme: written agreement before settlement; buyer aware no GST credit is available.
GST on property is one of the places where the BAS and the conveyancing file have to agree exactly. If you are developing, subdividing or buying through a business entity, the settlement statement and the activity statement should be prepared by the same hands. That is what our year-round compliance service does. Note that conveyancers cannot give GST advice unless they are registered tax or BAS agents; the ATO says so in as many words.
References: ATO, GST at settlement (last updated 14 October 2026); Law Companion Ruling LCR 2018/4; ATO, GST and the margin scheme; ATO, Property and registering for GST. Current at 23 October 2026.
This information is general in nature and does not constitute personal financial or tax advice. Please contact us to discuss your individual circumstances. Tax laws are subject to change; information on this page reflects legislation in effect as of October 2026.