When you sell a commercial property, you’re likely to make a capital gain or capital loss.
Capital gains are subject to capital gains tax (CGT), with a discount for individuals and trusts, and concessions for small businesses.
You’re also generally liable for GST on the sale price and can claim GST credits on related purchases.
To work out the GST you may be eligible to use the margin scheme, under which your GST liability is one-eleventh of the margin on the sale of the property, rather than one-eleventh of the total selling price.
GST doesn’t apply to property when it’s being sold as part of a GST-free sale of a going concern.
A going concern
A supply of a going concern occurs when:
- a business is sold, and that sale includes all of the things that are necessary for the business to continue operating, and
- the business is carried on, up until the day of sale.
The supply of a going concern is GST-free if it meets certain requirements including:
- the sale is for a payment or consideration
- the purchaser is registered, or required to be registered, for GST, and
- the seller and the purchaser have agreed, in writing, that the supply is of a going concern.
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