How the GST Margin Scheme Changes Your Development Funding
Property Lending
Margin scheme · GRV / NRV · Release price
A decision made when you acquire the site can change the GST on every sale, the bridge from GRV to NRV, the valuation basis a lender tests, the cash withheld at settlement and whether your release prices actually clear. This guide follows the developer from site purchase and feasibility through presales, settlement, unsold stock and refinance, including what to do when the margin scheme assumption changes late.
Quick Answer
The GST margin scheme can change the revenue and settlement cash available to repay a property development facility. Under the scheme, GST is generally one eleventh of the margin rather than one eleventh of the full sale price. On a taxable sale of new residential premises or potential residential land where the margin scheme applies, the purchaser generally withholds 7% of the contract price and pays it to the Australian Taxation Office, so that withheld amount does not reach you or your lender at settlement.
The 7% withholding is not the final GST liability. The GST liability under the margin scheme is worked out on the margin, then reconciled through the relevant activity statement. For funding, confirm the site's eligibility first, then make sure the GRV, NRV and valuation are being read on the same GST basis. Set release prices against the cash that will actually arrive, and do not assume a later GST credit or refund will be counted by the lender unless that treatment is expressly agreed.
Also called: GST margin scheme, margin scheme GST, GST on the margin, division 75 margin scheme.
What this guide covers
- What is the GST margin scheme, and why does your lender care?
- Does the GST margin scheme change how much you can borrow?
- Is the valuation on a development gross or net of GST?
- What does the GST withheld at settlement do to your release price?
- Does the seller have to give the buyer a GST withholding notice before settlement?
- What if the building is part commercial, or the site came from more than one purchase?
- What happens if the margin scheme clause was missed in your presale contracts?
- Can you use the margin scheme if you bought the site fully taxable?
- What should you do if the margin scheme does not apply and settlement is close?
- What happens to your GST position if you rent the unsold stock?
- Can you borrow the GST you have to pay on the site?
- What does a credit team actually do with a margin scheme assumption?
- Frequently asked questions
Scroll the table sideways on a phone.
| Where you are in the project | The question that matters now | Start here |
|---|---|---|
| Before you sign for the site | How is the acquisition treated for GST, and does that history leave the margin scheme available later? | Check the acquisition history before the feasibility assumes anything |
| Writing the feasibility or applying for finance | Is the revenue line and valuation being read on the same GST basis? | See what the facility is sized against and check the valuer's GST status |
| Signing presales | Do the contracts contain the right margin-scheme agreement and supplier notification? | Check the presale contracts before the error is repeated |
| Settlements are booked | What will actually reach the lender after GST withholding, and do the release prices still clear? | Rebuild the sell-down on settlement cash, not contract price |
| Completed stock is not selling | Can you lease or refinance the stock without creating a new tax, valuation or facility problem? | Work through the rent, consent and residual-stock decision together |
Most published material on this subject is written for the first two rows, which is the point in a project when the decision can still be changed. Six of these eight arrival points happen after the money is drawn, and they are the reason the second half of this guide exists.
What is the GST margin scheme, and why does your lender care?
The GST margin scheme is a way of working out GST on a property sale, and your lender cares about it because it decides how much of each sale price you actually keep. Under the scheme, GST is worked out on the margin between what you paid for the interest in land and what you sell it for, rather than on the full price. Everything downstream follows from that: the revenue line in the feasibility, the release prices across the sell down, and the cash that reaches the facility.
The arithmetic is worth stating once, because most pages on this subject describe the scheme without ever giving it. The Australian Taxation Office states that the GST normally payable on a property sale is one eleventh of the total sale price, and that under the margin scheme it is one eleventh of the margin instead. The margin is generally the difference between the sale price and either the amount you paid for the property, under the consideration method, or the value in an approved valuation, under the valuation method. Which method applies to you, and what the margin actually is on your site, are questions for your accountant or registered tax agent on your own documents.
The margin is not the project's accounting profit. Under the consideration method, the Australian Taxation Office's calculation starts with the sale price and the acquisition amount for the property. Construction costs, interest, selling costs and the rest of the feasibility still matter to project profit and funding, but they are not simply deducted from the sale price to create the Division 75 margin. That distinction is worth settling before anyone tries to copy a project-profit formula into the GST line.
That is where the tax question and the funding question part company. The Australian Taxation Office publishes both the mechanics and the eligibility test, and your adviser answers them on your facts. This page covers the other half: what the answer does to your funding. If you want the tax treatment itself, start with the Australian Taxation Office material on the margin scheme and read this alongside how property development finance works in Australia.
The scheme is not limited to one kind of property. It can apply to a residential subdivision and to a commercial sale, and the two branches behave differently at the settlement table, which is covered further down along with what happens when one building contains both.
Three things this page is not about. The margin scheme is not the GST-free treatment that can apply when a business changes hands as an operating whole. It is not the prior question of whether GST applies to your sale at all. And it is not the United Kingdom VAT margin schemes for second-hand goods, or the Indian GST margin provisions, both of which share the name and nothing else; everything here is Australian law and Australian practice. If your problem is an Australian Taxation Office debt stopping a settlement rather than the GST treatment of the sale itself, start at unpaid GST blocking settlement. If you simply want the term defined, there is a short entry in the glossary.
Does the GST margin scheme change how much you can borrow?
The margin scheme changes the revenue line and therefore the bridge from gross realisation value (GRV) to whatever net realisation value (NRV) a lender uses in its credit model, so on the same set of prices it can change what a lender is willing to lend. A GRV quoted gross of GST overstates the money available to repay the facility if the lender is actually testing a net figure, because part of every sale price is GST that never becomes yours. Move the same project onto the margin scheme and the same headline prices can leave more behind, which is why a tax election made in an accountant's office can quietly reset a credit decision.
Scroll the table sideways on a phone.
| Treatment | What the buyer pays | What reaches you | What the lender can size against |
|---|---|---|---|
| Fully taxable sale | Contract price, with 1/11th withheld at settlement on new residential premises or potential residential land | Price less the withheld amount, credit following later on lodgement | Lowest of the four, because GST is one eleventh of the whole price |
| Margin scheme sale | Contract price, with 7% withheld at settlement on new residential premises or potential residential land | Price less the withheld amount, credit following later on lodgement | More than a fully taxable sale at the same price, because GST is one eleventh of the margin only |
| GST-free supply under Subdivision 38-J | The price, no GST in it, nothing withheld at settlement | The whole price | Most per transaction, but a whole of business route, not a lot by lot sell down |
| Input taxed sale | The price, no GST in it, nothing withheld at settlement | The whole price | Revenue reads clean, but construction credits were not claimable, so the GST sits in the cost line |
Basis: Australian Taxation Office guidance on GST withholding on property settlements, page current at 4 June 2025, for the two withholding figures; and Australian Taxation Office guidance on calculating the GST payable, last updated 19 August 2021, for the one eleventh of the margin figure. Both read 8 September 2026. The last column states direction only, not a ratio.
There is a second-order effect on the revenue line that almost nobody joins up, and it matters most on commercial stock. Australian Taxation Office guidance states that a buyer of property where the margin scheme was used cannot claim a GST credit on the purchase, even where the purchase is for business purposes. If your purchasers are registered entities buying commercial lots, the treatment you elect changes what they can recover, and therefore what they are willing to pay. On residential stock sold to owner occupiers it makes no difference, because they were never claiming a credit. On a commercial sell down it is a pricing input, and it belongs in the feasibility rather than in a conversation at contract stage.
What a regulator actually publishes about sizing a development facility
One Australian regulator does publish a numbered ratio for development lending, and it is worth knowing exactly what it covers before anyone quotes it at you. The Australian Securities and Investments Commission's Regulatory Guide 45, in its March 2026 version, sets a benchmark that where a loan relates to property development the scheme does not lend more than 70% on the basis of the latest 'as if complete' valuation of the security property, and that funds are provided in stages on independent evidence of the progress of the development. For all other property the benchmark is 80% of the latest market valuation. It also requires disclosure of the loan to cost ratio on each development loan, and requires a loan to cost ratio above 75% to be highlighted, with loan to cost defined as the loan amount against the total cost of the project including the land.
Three qualifications decide whether that figure means anything for you. It governs unlisted mortgage schemes in which retail investors invest, not banks and not every non-bank lender. It operates as a disclosure benchmark on an "if not, why not" basis, so a scheme can lend above it and explain why, rather than being capped. And, decisively for this page, Regulatory Guide 45 nowhere states whether that 'as if complete' valuation is inclusive or exclusive of GST. Its own definitions of "as if complete valuation" and "market value" are silent on the point.
So the position is narrower and more useful than "nobody publishes anything". The ratio is published. The requirement for the valuer to state a GST basis is published, as the next section sets out. What is not published anywhere we could find is how the margin scheme moves the number the ratio is applied to. Treasury published the explanatory material behind the subdivided land amendments, and every other Australian authority publishing on the margin scheme is a tax authority rather than a lending one. Of the five bodies we checked, the Australian Prudential Regulation Authority returned residential mortgage and capital adequacy material only, and the Australian Banking Association, the Property Council of Australia and the Urban Development Institute of Australia returned nothing on point at all.
The figures in circulation, and what they actually are
Several numbers are circulating on this question and at least two of them are simply wrong, which matters because a feasibility built on the wrong one fails at the settlements rather than at the desk. We are not going to add a number of our own. What follows is what each figure is and where it came from, so you can check the one you were given.
Scroll the table sideways on a phone.
| The figure you may have been given | Where this class of figure comes from | What it actually is |
|---|---|---|
| One eleventh of the sale price | Australian Taxation Office | Correct. The GST on a fully taxable property sale |
| One eleventh of the margin | Australian Taxation Office | Correct. The GST where the margin scheme applies |
| 7% of the contract price | Australian Taxation Office | Correct, in its place. The amount the buyer withholds at settlement on a margin scheme supply. It is a withholding proxy, not the tax |
| The margin scheme is 7% of gross realisation value | A private lending company's feasibility page | Wrong on both limbs. 7% is the settlement withholding, and the margin scheme liability is one eleventh of the margin, not a percentage of realisation value |
| 10% of the contract price is withheld | A settlement industry publication | Wrong as stated. The Australian Taxation Office figure on an ordinary taxable sale is one eleventh of the contract price, which is about 9.09% |
| 10% of the GST exclusive market value | Australian Taxation Office | Correct, in its place. The withholding basis for supplies between associates where the consideration is less than GST inclusive market value. It is a third basis, not a version of the row above |
| 70% of 'as if complete' value, and loan to cost above 75% flagged | Australian Securities and Investments Commission, Regulatory Guide 45, March 2026 | Correct, but scoped. A disclosure benchmark for unlisted mortgage schemes, silent on whether the valuation is gross or net of GST |
| A 60 to 75 per cent net of GST ratio band | A broker page with no cited source | Unsourced. The numbers resemble the two above, detached from what they attach to. Test it against your own contracts before relying on it |
Basis: Australian Taxation Office guidance on calculating the GST payable and on GST withholding on property settlements; ASIC Regulatory Guide 45, March 2026 version, read in full 8 September 2026. Commercial sources are described by class rather than named. The last row is recorded because it is in circulation, not because it is endorsed.
How should a feasibility carry an unconfirmed margin scheme assumption?
Do not hide an unconfirmed GST treatment inside the revenue line. Show the treatment being assumed, who has confirmed it and the date of that advice, then run a downside sensitivity for the affected lots if the margin scheme is not yet locked down. That is a funding discipline, not a tax rule: the point is to stop one unresolved assumption from making the whole project look more fundable than it is.
The reason is practical. Eligibility comes from the acquisition history, the written agreement has to exist for the sale, and the treatment can differ across an assembled or mixed-use project. A credit team should be able to reconstruct the bridge from price list to GST treatment to the revenue number it is lending against without guessing what the spreadsheet author meant.
How the revenue line is actually built
The order of operations matters more than any single input. Sale prices come first, from the price list and the executed presale contracts. The GST treatment is applied second, lot by lot, because it can differ between lots in the same building where the contracts differ. Only then do you get the realisation value the lender works from, and it is a smaller number than the price list on every treatment except a GST-free or input taxed sale.
Getting that sequence the wrong way round is how a project ends up with a feasibility that never reconciles to the settlement statements. The definitions sit in gross realisation value, the numbers a credit team actually asks for are set out in the approval numbers behind a development facility, and the way the sell down assumption itself is tested is covered in how lenders test your sell down plan.
Is the valuation on a development gross or net of GST?
The valuer has to tell you, and that is the practical answer: Australian valuation guidance requires the valuer to report the GST status of their valuation, so the answer is on the report rather than being a matter of assumption. What the same guidance does not do is say anything about the margin scheme, which is precisely where the gap sits.
The governing document is ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, a guidance paper of the Australian Property Institute published with its New Zealand counterparts, effective 1 January 2025 and replacing the version withdrawn on 31 December 2024. Section 5.3 states that the valuer must report the GST status of their valuation. The paper then prescribes the exact form of words for New Zealand only, which is worth knowing because it means an Australian report states a GST status without a standard wording behind it. Read that line on your report before you argue with the number.
Scroll the table sideways on a phone.
| The question | Who answers it | What the guidance says |
|---|---|---|
| What the completed project is worth | The valuer | Market value on an 'as if complete' basis where the assessment is conditional on works being finished, with an 'as is' market value provided alongside it |
| Whether that value is stated gross or net of GST | The valuer, but on instructions | The valuer must report the GST status of the valuation. The prescribed form of words is given for New Zealand only |
| Whether the margin scheme is reflected in the value | Nobody, in the published guidance | ANZVGP 112 does not mention the margin scheme anywhere. Ask the question in the instructions rather than assuming an answer |
| What percentage is lent against that value | The lender | The guidance says it is not generally appropriate for the valuer to recommend a maximum or minimum loan percentage, amount or period |
| What the valuation is worth if the project changes | The valuer, on review | An 'as if complete' valuation is qualified on satisfactory completion in accordance with the plans and approvals provided, and the valuer reserves the right to review it if the completed state varies |
Basis: ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, Australian Property Institute with the Property Institute of New Zealand and the New Zealand Institute of Valuers, published 18 December 2024, effective 1 January 2025, read in full 8 September 2026. Sections 5.3, 5.4, 5.8, 6.1 and 6.4.
Two consequences follow for a developer, and they are the reason this section exists rather than sitting in a valuation firm's blog. The first is that the valuer supplies a value and its GST status, and the lender applies a ratio to it. If your feasibility is net of GST and the valuation is gross, or the reverse, the mismatch is not a disagreement about the market, it is two documents measuring different things, and it will show up as a facility that looks smaller or larger than the project supports.
The second is that the instructions matter more than the report. Instructions to the valuer come from the lender, and they set the basis, the special assumptions and what has to be reported. If the margin scheme is material to your revenue line, the time to ask how it is treated is when the instruction is written, not when the report lands. That is a conversation your broker can have and you usually cannot, because you are generally not the instructing party.
What is the difference between GRV, NRV and the lender's valuation when GST applies?
GRV is the headline expected sales value. NRV is the net realisation figure after the deductions used in the particular feasibility or credit model, commonly including GST and selling costs. The valuation is the valuer's market assessment on the GST basis stated in the report. They are related numbers, but they are not interchangeable.
NRV is finance and feasibility language rather than one statutory valuation formula. Different lenders and models can deduct different items, use different labels or apply a more conservative GST treatment than the developer's own tax calculation. So when someone says a facility is a percentage of NRV, ask for the bridge from gross sales to that NRV and whether the GST deduction reflects full GST, the confirmed margin-scheme liability or a lender-specific assumption. The percentage is not comparable until the denominator is.
This is why two lenders can quote the same headline LVR and still produce different dollar facilities. One may be applying the ratio to a gross or valuation figure while another is applying it to a net realisation figure after GST and selling costs. Put GRV, NRV, the valuation GST status and the lender's adopted value on one reconciliation before you compare offers.
A developer receives a valuation carrying an 'as is' value for the site and an 'as if complete' value for the finished townhouses. The feasibility carries a realisation value that is close to the 'as if complete' figure but not equal to it, and the gap looks suspiciously like one eleventh of the total.
The gap is not necessarily the GST, and assuming it is has cost projects real money. The 'as if complete' assessment is a market value on a stated GST basis, made on stated assumptions about completion and approvals, and it excludes things the price list may include. The only way to reconcile it is to read the GST status line on the report and the assumptions behind it, then compare like with like. If they still do not reconcile, the question goes back through the lender to the valuer, because the guidance requires the valuer to comment on any material difference between the bases they report.
What does the GST withheld at settlement do to your release price?
The withheld amount never reaches your account, and on a mortgaged lot it does not reach your lender either, so a release price set on the gross contract price will fall short on every lot it applies to. That is the whole problem in one sentence, and it is the sharpest thing on this page, because the tax side and the lender side of it are published separately and almost never joined up.
What is withheld, where it sits, and who lodges
- 1/11thof the contract price is withheld by the buyer and paid direct to the Australian Taxation Office on a taxable sale of new residential premises or potential residential land. Australian Taxation Office, GST withholding on property settlements, page current at 4 June 2025, read 8 September 2026.
- 7%of the contract price is the withheld amount instead, where the margin scheme applies to that supply. Australian Taxation Office, GST withholding on property settlements, page current at 4 June 2025, read 8 September 2026.
- Credit accountThe credit for the withheld amount is held in the supplier's GST property credits account, and is transferred into the activity statement account only when the relevant activity statement is lodged. Australian Taxation Office, GST withholding on property settlements, page current at 4 June 2025, read 8 September 2026.
- Purchaserlodges both forms: Form one, the GST property settlement withholding notification, and Form two, the GST property settlement date confirmation. The written notice that triggers them is yours to give, and it is covered in the next section. Australian Taxation Office, GST withholding on property settlements, page current at 4 June 2025, read 8 September 2026.
Two of these rows carry no figure on purpose. The account and the lodging party are the parts that decide timing, and timing is what a release price schedule has to absorb.
The mechanics are simple enough. The purchaser withholds and pays the Australian Taxation Office direct at settlement rather than paying that money to you. You get a credit for it, but the credit lands in your GST property credits account and only moves into your activity statement account when the relevant activity statement is lodged. That gap between settlement and lodgement is the timing problem, and on a staged sell down it repeats on every settlement.
Scroll the table sideways on a phone.
| Supply type | Amount withheld | Who pays it to the Australian Taxation Office | When the credit reaches you |
|---|---|---|---|
| Fully taxable supply | 1/11th of the contract price | The purchaser, direct, at settlement, instead of paying it to you | On lodgement of the relevant activity statement, transferred out of the GST property credits account |
| Margin scheme supply | 7% of the contract price | The purchaser, direct, at settlement, instead of paying it to you | On lodgement of the relevant activity statement, transferred out of the GST property credits account |
| Sale by a mortgagee in possession | The amount the sale attracts on the same basis as if the mortgagor had sold the property | The purchaser, direct, and not the mortgagee, for taxable sales from 1 July 2018 | Through the same account and lodgement route, to the entity liable for the GST on that sale |
Basis: Australian Taxation Office guidance on GST withholding on property settlements, page current at 4 June 2025, for the withheld amounts, the credit account and the two forms; and Australian Taxation Office guidance on GST and mortgagees in possession, page current at 20 June 2025, for the mortgagee row. Both read 8 September 2026.
Do not treat the 7% withholding figure as the GST rate under the margin scheme. It is a settlement withholding proxy. The seller's GST liability is still worked out under the margin-scheme calculation. In the Australian Taxation Office's own worked example, a property bought for $500,000 and sold for $900,000 gives a margin of $400,000 and a GST liability of $36,363, while the purchaser withholds 7% of the contract price, being $63,000. The seller reports the $36,363, the withheld credit is offset against it, and the seller receives a refund of $26,637. That distinction matters because the release price is hit by the withheld cash first, while the final GST liability is an accounting amount dealt with through the BAS.
Worked example: what does 7% withholding do to a lender release?
Both columns below use the Australian Taxation Office's own published figures at the same $900,000 contract price, one from its margin scheme example and one from its fully taxable example, with a single finance assumption added: an illustrative lender release price of $600,000. Every tax figure is the Australian Taxation Office's. The release price is hypothetical and is there only to show the cash bridge.
Scroll the table sideways on a phone.
| Cashflow step | Margin scheme example | Fully taxable sale at the same price |
|---|---|---|
| Contract price | $900,000 | $900,000 |
| Withholding basis | 7% of contract price | 1/11th of contract price |
| Withheld at settlement | $63,000 | $81,818 |
| Cash arriving before other settlement adjustments | $837,000 | $818,182 |
| Illustrative lender release price | $600,000 | $600,000 |
| Cash remaining after the release, before commission, legal costs and other adjustments | $237,000 | $218,182 |
| Sale-side GST liability | $36,363, being one eleventh of the $400,000 margin | $81,818, being one eleventh of the whole price |
| Withholding credit attached to the sale | $63,000 | $81,818 |
| Excess of withholding over the sale-side GST liability before other BAS amounts | $26,637, which the Australian Taxation Office example shows as a refund | $0 |
Tax figures: both columns are taken from worked examples published on the Australian Taxation Office's GST at settlement page, read 8 September 2026. The margin scheme column follows its example of a property bought for $500,000 and sold for $900,000; the fully taxable column follows its example of a new apartment sold for $900,000 with 1/11th withheld. Dollar figures are rounded to the nearest dollar. The $600,000 release price is illustrative only and is not from any source. Agent commission, legal costs, settlement adjustments and every other amount on the activity statement are excluded.
Two things fall out of that, and the second is the one developers miss. The margin scheme treatment leaves about $18,818 more cash at settlement before other adjustments, which is the part a release price schedule feels immediately. And the withheld amount overshoots the actual GST liability by $26,637 on these figures, because 7% of the whole price is a flat proxy rather than the tax. That excess is not lost, but it is not cash either: it sits in the GST property credits account until the relevant activity statement is lodged, and the final account position reflects every other GST liability and credit on that statement.
Now the part that matters most if there is a mortgage over the stock, and it is the argument almost nobody makes. Where a mortgagee sells in possession, the buyer withholds and pays the Australian Taxation Office instead of paying the mortgagee, and the mortgagee may apply the margin scheme only if the mortgagor could have. Read that twice, because it means your margin scheme position follows the property into the hands of a lender exercising power of sale. If you were ineligible, so is your lender, and the recovery number in the lender's own downside case is smaller than the one on the file. That is a credit issue at the point the facility is written, not a curiosity for the day it goes wrong.
The practical consequence for a live project is this: a release price schedule agreed at the start on gross prices will under deliver on every lot, and the shortfall compounds across the sell down until the facility does not clear. It is the kind of error that surfaces at the third or fourth settlement, when there is nothing left to fix it with.
What a release price actually has to cover
A release price has to cover the debt attributable to the lot plus the costs that come out of that settlement, calculated on what actually lands, not on the contract price. That means the withheld amount comes off first, then agent commission, legal costs and any adjustments, and only what survives is available to the facility. Do the schedule the other way round and the shortfall is baked in before the first settlement.
The same discipline applies at the end of the project, when the facility rolls or has to be repaid in full: what has to be dealt with at that point is set out in what happens to a development loan at practical completion, and the gap arithmetic itself is worked through in closing a settlement shortfall.
Will a lender count the later GST credit or refund when setting the release price?
Do not assume it will. There is no market-wide published Australian lender rule that requires a future GST property credit or possible refund to be counted in a release-price calculation. The statutory GST credit is one question; the lender's cashflow treatment is another. Unless the credit approval, facility documents or agreed release schedule expressly recognise the later amount, model the release against the cash available at settlement and treat the BAS movement as a later cashflow item.
A GST property credit is also not automatically a cash refund. It moves through the activity statement account when the relevant BAS is lodged and can be absorbed by other GST liabilities and credits on that statement. If the project relies on a later credit or refund to clear the facility, put that assumption in the submission and have the lender's treatment confirmed before settlements start.
Can you get the withheld amount back any sooner?
Only by shortening the wait to the next lodgement, because the credit does not move until the relevant activity statement is lodged. That is worth understanding properly, since it is the one variable in this mechanism that sits on your side of the table rather than the purchaser's or the Australian Taxation Office's.
The consequence is that lodgement frequency is not only a question about the acquisition, which is how it is usually framed. It sets the length of the gap on every settlement in the sell down. On a staged release of twenty lots, the difference between waiting for the next monthly cycle and the next quarterly one is repeated twenty times, and on a project where the release prices are already tight that repetition is the difference between a facility that clears itself and one that needs a top up. Whether you can change your cycle, and whether it is sensible to, is a question for your registered tax agent, not for a broker. What a broker can tell you is that the answer belongs in the sell down schedule you give the lender, not in a footnote.
Does the seller have to give the buyer a GST withholding notice before settlement?
Yes. If you are supplying residential premises or potential residential land, you must give the purchaser a written supplier notification stating whether they have a GST withholding obligation and, where they do, the amount to be withheld. The notice can sit in the contract or be provided separately before settlement, and penalties may apply if the required notice is not given.
The Australian Taxation Office calls it a supplier notification. If you are selling residential premises or potential residential land you must notify the purchaser in writing before settlement whether or not they have a withholding obligation, advise whether an amount must be withheld from the contract price, and state the withholding amount. It can sit inside the sales contract or be given as a separate document beforehand, and most standard land contracts have been revised to carry it.
Scroll the table sideways on a phone.
| The point | What is required | Why it matters to the funding |
|---|---|---|
| Who gives it | The supplier, in writing, to the purchaser | It is your obligation even though the purchaser lodges the forms and pays the money |
| When | Before settlement. It may be included in the contract or given separately beforehand | On an off the plan campaign that means it is usually settled at contract stage, a year or more before the money moves |
| What it must contain where there is a withholding obligation | The name and Australian Business Number of all suppliers, the GST branch number if applicable, the amount the purchaser must pay, and the date it must be paid | The amount stated is the number your release price has to be built around, so it needs to be right before the schedule is agreed |
| What it must contain where there is no obligation | A clear statement that no withholding is required | The notice is still required. Silence is not the same as a notice saying nothing is withheld |
| If you get the amount wrong | You must provide the purchaser with an amended notification | A wrong amount flows into the settlement statement and into what your lender receives |
| If you do not give one at all | A supplier who fails to provide a notification may incur a strict liability offence of 100 penalty units, which may be prosecuted before the court, or an administrative penalty of 100 penalty units. Penalties do not apply where you reasonably believed you were not required to give the notice, or made an honest and reasonable mistake about how the requirements apply to the supply | It is an exposure sitting with the developer entity, at the same moment the project is at its most stretched, and the defences turn on what you believed at the time rather than on the outcome |
| If the purchaser relies on your notice | The Australian Taxation Office will not impose penalties on a purchaser where it was reasonable for them to rely on a supplier notification | The consequence of a defective notice tends to land on you rather than on them |
Basis: Australian Taxation Office guidance on GST at settlement, together with its companion guides for suppliers and for purchasers, all read 8 September 2026. Note on timing: several conveyancing and law firm sources state the notice is due 14 days before settlement. The Australian Taxation Office material read for this page says "before settlement" and "on or before the time they make the supply" and does not state a period, so no period is stated here. Ask your solicitor for the position on your contract.
The funding consequence is the one nobody writes down. The notice states the withholding amount, and the withholding amount depends on the GST treatment, which depends on whether the margin scheme applies. So the same eligibility question that sets your revenue line also sets a number you are legally obliged to hand the buyer in writing, usually long before settlement. If the treatment turns out to be different from what you assumed, you have not only mis-sized the facility, you have issued notices that need amending across the campaign.
What if the contract price changes after the supplier notification?
If a variation, discount or rebate changes the information in the original notice before settlement, the supplier must issue an amended notification and the withholding amount is calculated on the adjusted price. The Australian Taxation Office puts it directly: rebates are a type of discount or a reduction in price that is not a normal settlement adjustment, they are included when calculating the GST withholding amount, and when an adjustment or rebate is applied before settlement the contract price should be reduced and the withholding amount calculated on the adjusted price. The purchaser and their representative should check the lodged details before settlement and amend the property-settlement forms where required. That is not only conveyancing housekeeping: it changes the cash that reaches the developer and therefore the amount available to clear the release price.
What happens after the notice: Form one and Form two
Once the purchaser has the written supplier notification, Form one can be lodged after the contract is entered into and must be lodged by the due date for the withholding payment, usually settlement. For a standard land contract, Australian Taxation Office guidance states that Form two must be lodged within two business days before settlement, on the day of settlement, or on the next business day after settlement. Instalment contracts run to a different trigger, being the first payment other than a genuine deposit. The purchaser or their authorised representative handles those forms; the developer's job is to make sure the notification they rely on is correct.
The practical order is therefore: settle the GST treatment, write or correct the notices, check the settlement forms reflect them, then agree the release price schedule with your lender on the amount that will actually arrive. Doing it in the reverse order is how the numbers in a settlement shortfall get built.
What if the building is part commercial, or the site came from more than one purchase?
Then the building does not have one GST answer, and a feasibility built on a single blended assumption will be wrong somewhere. The margin scheme can apply to the taxable part of a mixed supply, eligibility is tested against each acquisition rather than against the finished building, and the settlement withholding attaches only to the residential side. Three different splits, running through the same project.
Take them in order, because they are commonly collapsed into one. On the mixed supply question, the Australian Taxation Office states that the margin scheme can be applied to the taxable part of a sale that is partly GST-free and partly taxable. On the assembled site question, where property is obtained through two or more individual purchases the rules apply to those individual purchases rather than to the whole property being sold, which means an ineligible acquisition can taint part of a site without taking the scheme away from all of it. And on apportionment, the Australian Taxation Office considers an area based apportionment appropriate and accepts that other reasonable methods may also be, because the law does not expressly provide a means of working out the extent to which a sale is connected with each purchase.
Scroll the table sideways on a phone.
| What splits | On what basis | What it does to the funding |
|---|---|---|
| Margin scheme eligibility | By acquisition. Each individual purchase making up the site is tested on its own history | Part of a site can be ineligible while the rest is not, so the revenue line splits by lot, not by building |
| The margin itself | By apportionment. An area based method is considered appropriate, and other reasonable methods may be | Two defensible methods can give two different margins, so the method has to be settled before the feasibility hardens |
| Settlement withholding | By what is being sold. It attaches to new residential premises and potential residential land | Residential lots settle net of a withheld amount, commercial lots generally do not, so the release price schedule cannot be uniform |
| The buyer's GST credit | By treatment. No credit is available on a purchase where the margin scheme was used | Registered buyers of the commercial lots price on what they can recover, so the treatment reaches the sale prices themselves |
| Where part came through an ineligible supply | By adjustment rather than denial, in the circumstances the law sets out | An increasing adjustment can arise equal to the credit previously claimed, which lands as a cost the feasibility did not carry |
Basis: Australian Taxation Office guidance on calculating the GST payable, last updated 19 August 2021, covering mixed supply, apportionment, subdivided land and increasing adjustments, read in full 8 September 2026; and Australian Taxation Office guidance on GST withholding on property settlements, page current at 4 June 2025. How these apply to your building is a question for your accountant or registered tax agent on your acquisition documents.
There is also a rule for what happens when one contract carries both. Where a contract includes multiple supplies of different kinds, for example new residential premises and commercial premises, and each supply has not been allocated a portion of the total contract price, the Australian Taxation Office states that suppliers need to determine a reasonable apportionment of the contract price that applies to the withholding obligation, and that if it is not practical to apportion the price the withholding amount should be based on the total price for the supply. Read that last clause carefully, because the fallback is punitive: fail to apportion and the withholding is calculated on everything, including the part that would not have attracted it.
One more mechanic that catches subdivisions specifically. Where land is purchased and then subdivided or strata titled, the margin on each lot is the selling price less the price paid for that portion of the property, and any reasonable method of apportionment may be used to work out that portion. That is the arithmetic behind a lot by lot revenue line, and it is why a price list and a feasibility can look reconciled at the top and diverge lot by lot underneath.
A five storey building carries two retail tenancies at ground level and eighteen apartments above. The site was assembled from two purchases from different owners, some years apart, and the developer's feasibility applies one GST treatment across the whole project because that is how the price list is organised.
Three things can pull that apart. The two acquisitions may not have the same history, so the scheme may be available on one portion and not the other. The retail lots and the residential lots settle differently, because the withholding attaches to the residential side, so a release price schedule written once will be wrong on part of the building. And the apportionment method chosen for the margin will move the answer on every lot. None of it is exotic, and all of it is invisible until either the accountant or the credit team asks how the number was built. The order of operations set out in how the revenue line is built exists to catch it.
What happens if the margin scheme clause was missed in your presale contracts?
Where the margin scheme clause was left out of a presale contract there is a remedy, but it is narrower than most people are told, and it fixes the paperwork rather than the eligibility. That distinction is the whole section, because it is the line most published answers blur, and it is the difference between a fixable problem and a hole in the feasibility.
Start with the statute. The agreement to apply the margin scheme must be made on or before the making of the supply, or within such further period as the Commissioner allows, under section 75-5(1A). So there is a route back, and it is a real one.
Scroll the table sideways on a phone.
| The situation | Can the discretion help | What the statute or Practice Statement says |
|---|---|---|
| The parties agreed, but it was not written down before the supply | Yes, in principle | Section 75-5(1A) allows the agreement to be made within such further period as the Commissioner allows, and PS LA 2005/15 names an inadvertent failure to put the agreement in writing as a case where it may be appropriate |
| A genuine mistake about GST-free status or about registration | Yes, in principle | PS LA 2005/15 names a genuine mistake, for example a supply mistakenly believed to be GST-free, or a supplier who mistakenly considered it was not required to be registered |
| The parties never agreed the scheme would apply | No | The Australian Taxation Office states it has no discretion to apply the margin scheme where the parties do not agree that it applies |
| The acquisition was ineligible in the first place | No | The discretion extends time only and cannot alter the circumstances under which the scheme can be applied, and section 75-5(2) denies the scheme outright where the entire interest came through an ineligible supply |
Basis: section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999, read in full on AustLII 7 September 2026; PS LA 2005/15, current version 24 July 2025; and Australian Taxation Office guidance on the written agreement to use the margin scheme, page current at 19 August 2021.
On the drafting itself, the most useful published guidance does not come from a marketing page. The professional indemnity insurer for Victorian lawyers tells practitioners that on the standard contract the words margin scheme should be written in the appropriate box, and that where the contract is silent but the parties agree before settlement, an exchange of letters confirming the agreement is sufficient to comply with the requirement for an agreement in writing. That is Legal Practitioners' Liability Committee guidance, last updated 7 September 2016, and it is written for solicitors rather than for developers, which is precisely why it is worth reading.
What the discretion can do is bounded. It may be exercised where all the other requirements to apply the scheme are met, where neither the recipient nor the supplier has reported GST on the basis that the scheme does not apply, and where there is no arrangement producing an outcome contrary to the policy of the legislation. Any decision to exercise it must be approved by an Executive Level 1 officer or above. And it extends time only: it cannot alter the circumstances under which the scheme can be applied, and there is no discretion at all where the parties did not agree that it applies. A refusal, or an allowance, is a reviewable GST decision, so it can be objected to.
A developer sells a building off the plan across a campaign that runs for most of a year. The first tranche of contracts is drawn by the solicitor who set the project up and carries the margin scheme election in the box. Partway through, a second agency starts writing contracts on a slightly different precedent, and on those the box is left blank. Nobody notices, because nothing turns on it until settlement.
At completion the position splits. The lots with the election carry the smaller withheld amount and the smaller GST liability. The lots without it are worked out on the full price, and the only remedy available is an application to extend the time to make the agreement, which fixes paperwork where the parties actually agreed and does nothing where they did not. The facility, meanwhile, was sized on a feasibility that assumed one treatment across the whole building, so the shortfall shows up as a settlement shortfall on the lots nobody checked. The supplier notifications on those lots also stated the wrong withholding amount and have to be amended.
The reason this belongs on a finance page rather than a tax one is the timing. The clause is signed during the presale campaign, often a year or more before completion, and by the time anyone checks it the facility has already been sized on a feasibility that assumed the scheme applied. Nothing about the funding is wrong when the money is drawn. It is wrong at the settlements, which is the worst possible moment to find out.
What to check in the presale contracts
Check every contract, not the precedent. The question is whether each executed contract carries the election, in writing, made on or before the supply, signed by both parties and clearly identifying the property, and whether the answer is the same across every tranche of the campaign and every agency that wrote contracts. Where a contract is silent, check whether there is correspondence before settlement that records the agreement, because that is the route the insurer's guidance points to. While you are in there, check that each contract also carries the supplier notification and that the amount in it matches the treatment the contract actually elects.
Do it while the campaign is running rather than at completion, since the same contracts are also where the other dated obligations live, including the ones covered in what to do when an off the plan sunset clause is approaching.
Can you use the margin scheme if you bought the site fully taxable?
No, and that is the shortest answer on this page: where GST on your purchase was worked out on the full price, the margin scheme is not available to you when you sell. The Australian Taxation Office states the reason plainly, which is that you would already have claimed that GST back as part of your business. Eligibility is decided by how you acquired the site, not by how you would like to sell it, which is why it is a due diligence question at acquisition rather than a drafting question at sale.
The governing rule is section 75-5(2): the margin scheme does not apply if you acquired the entire freehold interest, stratum unit or long term lease through a supply that was ineligible for the margin scheme. Section 75-5(3) then lists seven ways a supply becomes ineligible, and they are worth setting out plainly rather than collapsing into a line, because most of them describe transactions a developer would not expect to reach their GST position at all.
Before you sign the site contract, get these answers in writing
- How is the vendor treating the sale for GST: fully taxable, margin scheme, GST-free or outside GST?
- Which entity is acquiring the site and which entity is expected to develop and sell it?
- Does your accountant or registered tax agent say the acquisition history leaves the margin scheme available on the intended resale?
- What does the contract actually say about GST, including any margin-scheme or going-concern wording?
- If the answer is uncertain, has the feasibility been stress-tested without relying on the margin scheme benefit?
Those five answers belong in the acquisition file before finance terms harden. They are also the fastest way to avoid the most expensive version of this problem: discovering after presales have been signed that the revenue line used for the loan was built on a treatment the site never had.
The fifth of those is the one to sit with. Buying a site as part of a business acquired as a going concern is common, and it is GST-free at the time, which feels like an unambiguously good outcome. What a developer will not expect is that the treatment reaches forward into their own sales two transactions later, because the question is what the entity before them did, not what they did. If the vendor had bought the land through a fully taxable supply worked out on the full price, the scheme is gone by the time it reaches you.
Scroll the table sideways on a phone.
| How you acquired the site | Margin scheme available | Why |
|---|---|---|
| GST on your purchase was itself worked out under the margin scheme | Yes | You were not entitled to a credit on the purchase, so nothing has already been recovered |
| Seller was not registered and not required to be registered for GST | Yes | No taxable supply was made to you, so no ineligible supply sits behind your interest |
| Land came from a private seller outside any enterprise | Yes | Same reason: there was no taxable supply into your hands |
| You inherited from someone who had acquired eligibly | Yes | The deceased's own acquisition is what the test looks at, and it was clean |
| Entire interest through one supply that is not on the section 75-5(3) list | Yes | The denial in section 75-5(2) is keyed to the listed ineligible supplies only |
| Your purchase was taxable and the GST on it was worked out on the full price | No | First ineligible limb. The Australian Taxation Office puts it as: you would have claimed the GST back |
| You inherited from a person who had acquired all of it ineligibly | No | The ineligibility passes through the estate with the interest |
| From a fellow GST group member, or a GST joint venture operator, that acquired ineligibly | No | The test looks through the group or joint venture to the last supply from outside it |
| As part of a GST-free supply under Subdivision 38-J or 38-O, from a registered entity that had acquired fully taxable | No | The going concern route carries the earlier fully taxable acquisition forward to you |
| From an associate without payment, where the associate had acquired fully taxable | No | Same principle applied to associates, in the circumstances section 75-5(3) sets out |
| Only part of the interest came through an ineligible supply | Not denied outright | The scheme is not lost, but an increasing adjustment can arise, equal to the credit previously claimed |
Basis: section 75-5(2), (3) and (4) of the A New Tax System (Goods and Services Tax) Act 1999, read in full on AustLII 7 September 2026, and Australian Taxation Office guidance on eligibility to use the margin scheme, on purchasing property using the margin scheme, and on calculating the GST payable, all last updated 19 August 2021 and read 8 September 2026. This table sets out the common routes, not every case in the section. Your own eligibility is a question for your accountant or registered tax agent on your acquisition documents.
The last row is the one most pages in this lane skip, and it connects straight back to assembled sites. Acquiring only part of an interest through an ineligible supply does not deny the scheme outright, but it can produce an increasing adjustment equal to the GST credit previously claimed on that part. On a site assembled from more than one acquisition, which is most infill development, that is not an edge case, and it lands as a cost line the feasibility never carried.
A developer buys a site from a registered vendor. The contract is silent on the margin scheme, GST is worked out on the full price, and the developer claims the credit on the acquisition, which feels like the right outcome at the time because the cash comes back.
Eighteen months later the feasibility for the sell down is written on the assumption that the margin scheme will apply to the lots. It cannot. The acquisition was a taxable supply on which GST was worked out without the scheme, which is the first of the ineligible limbs, so every lot is worked out on the full price instead of the margin. Nothing on the cost side moves. The entire correction lands on the revenue line, which is the number the facility was sized against in the first place, and it lands after the site is bought and the design is locked.
The eligibility test itself belongs with the Australian Taxation Office and with your adviser, and its eligibility guidance is the right starting point. We are not going to compete on it, because the useful thing a broker can tell you is the consequence rather than the test.
The site decided this before you did
A feasibility written on a margin the developer never had is wrong before the first drawdown, and the correction lands entirely on the revenue line. That is the funding consequence in one line, and it is why the acquisition documents, not the sales strategy, are the first thing a credit team should be looking at. The order they get tested in is the same order set out in what lenders test in a feasibility, and the facility that sits on top of it is described in development finance.
What should you do if the margin scheme does not apply and settlement is close?
When the margin scheme turns out not to apply and settlements are weeks away, the moves left are funding and sequencing moves rather than tax moves, because the tax answer is already fixed, and the cheapest of them do not involve borrowing anything. This section exists because the advice on every other page about this subject, including the advice further up this one, is to check the position before the feasibility hardens, and that is no use at all to someone who is already past it.
Take the tax question off the table first. If the acquisition was ineligible, no drafting, no letter and no application changes that, and time spent looking for a way around it is time not spent on the settlement. If the parties did agree and the agreement was simply never written down, there is an application worth making, and it belongs with your registered tax agent the same day you find out. Either way the funding conversation has to run in parallel rather than after it, and the supplier notifications on the affected lots need amending regardless.
Scroll the table sideways on a phone.
| What you can do | What it changes | What it costs you |
|---|---|---|
| Tell the lender before the settlement rather than after it | Turns a shortfall into a variation request that can be assessed, instead of a failed settlement | Nothing. It is the only free move on this list and the one most often skipped |
| Re-check the treatment lot by lot | Can confine the problem to part of the building rather than all of it, where contracts or acquisitions differ | Adviser time, and it has to be done on executed contracts, not on the precedent |
| Re-issue the supplier notifications with the correct amounts | Puts the right number in front of every purchaser and their conveyancer before settlement | Nothing beyond the work, and it is required rather than optional where the first notice was wrong |
| Re-sequence which lots settle first | Puts the lots that clear their own release price through the facility first | Often not available, because settlement dates sit in contracts you cannot move unilaterally |
| Renegotiate the release price schedule onto net proceeds | Makes the schedule match what actually arrives rather than the contract price | A lender may want more equity, a shorter term or tighter conditions in exchange |
| Contribute equity against the affected lots | Clears the release price on the lots that fall short, keeping the sell down moving | Uses cash that was doing something else, usually the contingency or the next deposit |
| Apply to extend the time to make the agreement, where the parties did agree | Can restore the treatment where the failure was the paperwork rather than the eligibility | Runs on the Commissioner's timetable, which is not your settlement timetable |
| Vary or refinance the facility | Buys time across the remaining sell down instead of fixing one settlement | Interest and fees, and it is a credit decision rather than an entitlement |
Indicative and general only, drawn from broking practice rather than from any published dataset, and current as at 8 September 2026. Not a quote and not an offer. Which of these is available depends on your contracts, your lender's policy and your circumstances at the time, and nothing here is financial, legal or tax advice.
The extension clock does not run to your settlement date
An application to extend the time for the margin scheme agreement is decided on the Commissioner's timetable, and nothing in the published material ties that timetable to a contract date. PS LA 2005/15 sets out the conditions for the discretion and requires the decision to be approved by an Executive Level 1 officer or above. It does not set a period within which the decision is made, and it says nothing about settlements at all, because it is not a document about settlements.
That is the timing mismatch nobody publishes, and it is the reason this section is not simply a cross reference to the remedy. A refusal or an allowance is a reviewable GST decision, which means an objection is available, and an objection is a further process again. So a developer with settlements booked has to build the funding position on the assumption that no answer has arrived, and correct it later if a favourable one does. The alternative, waiting to see, is how a facility ends up in default over a question that was always going to be decided eventually.
A developer's accountant confirms in the last week of a quarter that the margin scheme is not available on the site, because of how it was acquired. Six settlements are booked over the following eight weeks and the release prices were agreed at the start of the project on gross contract prices.
The version of this that goes badly is the one where the first the lender hears of it is a settlement that does not clear. The version that goes better is unglamorous: the broker takes the corrected numbers to the lender before the first of the six, with the lot by lot split, the revised release prices and the equity the developer is prepared to put in, and asks for a variation. Nothing about the tax has changed between the two versions. What changed is whether the lender was asked to approve something or told about something after the fact.
If the shortfall is already sitting in front of you rather than three weeks away, the arithmetic of closing it is worked through in closing a settlement shortfall, and the facility level options are in development finance.
What happens to your GST position if you rent the unsold stock?
Renting stock you built to sell changes the extent of creditable purpose and can claw back construction credits, and the decision is very often forced by a facility expiring rather than freely chosen. That is the join this section exists to make: the tax consequence arrives through the funding calendar.
The starting position is straightforward. Building to sell allows the credits on construction, because the intended supply is taxable. Residential renting is input taxed. Renting stock that was built for sale is therefore a change in the extent of creditable purpose, which requires an apportionment on a fair and reasonable basis and produces an adjustment at the end of the relevant adjustment period under Division 129.
The useful part is the test. Whether premises are held for the purpose of sale is decided objectively, on a weighing up of the evidence, and GSTR 2009/4, consolidated version current at 18 March 2026, lists marketing of the premises for sale first among the factors the Commissioner would expect to be present: listing with an agent, advertising, open inspections, showing prospective buyers through. No single factor is decisive and the ruling expects a preponderance of them. The authorised version is the consolidated PDF the ruling page names, and the paragraphs to read are 44 and 45.
The ruling also treats concurrent application separately. Premises that are leased while still genuinely held and marketed for sale are not in the same position as premises taken off the market, and that distinction is doing real work in a stalled sell down, where the temptation is to lease first and worry about the marketing later.
The five year rule sits underneath all of this. Under section 40-75(2) of the A New Tax System (Goods and Services Tax) Act 1999, read in full on AustLII on 7 September 2026, residential premises are not new residential premises if, for a period of at least five years, they have only been used for making supplies that are input taxed under the residential rent provision. Whether your stock is anywhere near that is a question for your adviser on the actual dates, but it is the reason a long lease of unsold stock is a different animal from a short one.
Will your lender let you lease the unsold stock?
That question is usually answered before the tax question, and it is answered by your loan documents rather than by the Australian Taxation Office. It is the half of this decision that gets left out of every tax page on the subject, and it is the half that can stop the plan outright.
Facilities written for a sell down commonly require the lender's consent before a lease is granted over secured stock, and the reasons are not procedural. Completed stock valued for an in one line sale to a single purchaser is not valued on the same basis as tenanted stock, so a lease can move the security value the facility is measured against. A lease can also interact with covenants tied to sales rates or to the facility's expiry, and a long lease can make the stock harder to sell to the buyer pool the feasibility assumed. Read the consent and leasing clauses before a tenant is signed up, not after, because the leasing decision and the refinance decision are in practice the same decision.
A project completes with a run of apartments unsold. The construction facility is inside its last quarter, the agent is confident but slow, and holding costs are running. Somebody suggests leasing the remaining stock, because a tenant covers the interest and the market may be better next year.
Two things decide how this goes, and neither is the leasing itself. On the tax side it is whether the stock comes off the market, because leased while genuinely and actively marketed for sale is treated differently from withdrawn and held as an investment, and the evidence that decides which one you are in is objective and largely contemporaneous. On the funding side it is whether the facility permits the lease at all. Meanwhile the facility expiry is what forces the call in the first place, which is why the refinance decision and the tax decision are the same decision here, and why the choice is better made against the signals set out in what happens when a construction facility expires with stock unsold than against a leasing offer in front of you.
When the facility expiry makes the tax decision
If the facility runs out before the stock sells, the tax decision gets made by the calendar rather than by the developer, which is the worst way to make it. A refinance changes what you can afford to do, because it buys the time to stay genuinely on the market instead of leasing under pressure, and that in turn is what keeps the objective evidence pointing at a purpose of sale.
The signals that a hold and refinance is the right call are set out in the residual stock refinance signals, the facility itself in residual stock loan, and the year end valuation question that follows completed stock into the next financial year in trading stock valuation for developers at end of financial year.
Can you borrow the GST you have to pay on the site?
Where a real gap exists, developers close it in one of two ways, from existing liquidity or by borrowing short term against the refund, and which one is right is a timing and cost question rather than a product question. The prior question, and the one that gets skipped, is whether there is a gap at all, because on some acquisitions there is nothing to bridge.
Start with the case where the gap is real. On a fully taxable acquisition the buyer has to fund the GST on the day the purchase settles and recovers it later through the activity statement, while a commercial facility is normally sized on the base purchase price. So the GST component has to be found from somewhere for the period between settlement and the refund, even though nobody involved disputes that it is coming back. That is the situation the informal term GST loan describes.
Using existing liquidity costs you whatever that cash was otherwise doing, which on a live development is usually the contingency or the next deposit. Borrowing short term against the refund costs interest and fees for a period that is genuinely short, and it leaves the cash where it is. Neither is obviously right, and the honest comparison is between the cost of the borrowing and the cost of the liquidity, not between the borrowing and nothing.
The variable that actually decides it is how long the refund takes to come back, and that depends on your lodgement cycle rather than on the lender. A business lodging monthly is waiting a materially shorter time than one lodging quarterly, and the shorter the wait, the harder it is for any borrowing cost to beat simply funding it yourself. It is the same lever described further up in getting the withheld amount back sooner, applied at the other end of the project. Test it on your own cycle and your own numbers, in the same way the rest of the approval numbers get tested, and read the term itself in the GST glossary entry if it is new to you.
What if you bought the site under the margin scheme?
Then there is no gap to fund, because there is no refund coming. Australian Taxation Office guidance states that where you buy property on which the margin scheme was used, you cannot claim a GST credit for the GST included in the purchase price, even where the purchase is for business purposes.
The funding consequence runs in two directions and both are worth having straight before anyone quotes you anything. Going in, a margin scheme acquisition has no timing problem to solve: the GST is part of the price you paid and it is not coming back, so a short term facility secured against a refund has nothing to attach to, and any conversation framed that way is describing the wrong transaction. Coming out, the same rule applies to your own purchasers, so on commercial stock sold to registered buyers, the treatment you elect is visible in what they can recover and therefore in what they will pay. That is a revenue line input, and it belongs in the feasibility rather than in a discussion at contract stage.
We are deliberately not printing a rate, a term band or an advance percentage for any of this, and you should be sceptical of pages that do. The figures circulating on this question are marketing rather than published evidence.
What does a credit team actually do with a margin scheme assumption?
A credit team treats a margin scheme assumption as a claim to be evidenced, not as an input to be accepted, and it goes looking for the acquisition documents to test it. That is the difference between a feasibility that survives credit and one that comes back with questions, and it is why the tax election ends up on a lending file at all.
From our broking, indicative
What a credit team asks when a feasibility carries a margin scheme assumption is narrower than developers expect, and it is almost never about the scheme itself.
- The assumption is tested against the contracts, not against the spreadsheet. The question is which executed documents say the scheme applies, and whether they all say it.
- A revenue line stated gross of GST is the most common correction we see, and it is usually an honest error rather than an aggressive one.
- The valuation and the feasibility are compared on the same basis. Where one is gross of GST and the other is net, that gets resolved before anything else is discussed.
- The withheld amount is treated as a timing question, and the sell down schedule has to absorb it settlement by settlement.
- Eligibility is answered by the acquisition history. How the site was bought decides it, and no sales strategy changes that answer.
- Where the treatment differs between lots in the same building, a credit team will want the split before it will lend against the whole.
- Where the position has already gone wrong, being told early is worth more than being told accurately. A corrected number three weeks before a settlement is a variation. The same number on the day is a problem.
Indicative only, drawn from deals we have placed rather than from any published dataset, and current as at 8 September 2026. Not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application, and nothing here is financial, legal or tax advice.
What should you send your broker or lender if the margin scheme affects the project?
Send the acquisition contract, the written GST position from your accountant or registered tax agent, the current lot-by-lot feasibility, the valuation showing its GST status, the executed presale contracts, the supplier notifications and the current release-price schedule. If settlements are already booked, add a settlement calendar showing the expected withholding on each lot. That pack lets the funding question be assessed without asking a credit team to infer the tax treatment from a spreadsheet.
None of that is exotic. It is the same discipline applied to every other assumption in a feasibility, which is set out in what lenders test in a feasibility. The margin scheme is unusual only in that it looks like somebody else's problem right up until the settlements start, and by then the facility is written.
The margin scheme starts as an acquisition and tax question, then follows the project all the way through finance. It can change the bridge from GRV to NRV in the feasibility, the GST basis you need to reconcile with the valuation, the amount withheld from residential settlements, the release price each lot has to clear and the choices left if stock is unsold at facility expiry. The most important distinction is that 7% is a settlement withholding amount, not the margin-scheme GST liability, and the most important sequence is to confirm the acquisition history before the funding structure relies on the result.
Key takeaway: confirm the site's GST history, make GRV, NRV and the valuation speak the same GST language, get the supplier notices right, model release prices on cash that actually lands, and tell the lender before a changed GST assumption becomes a failed settlement.Bring the current feasibility, valuation, acquisition contract, your accountant or registered tax agent's GST position, presale schedule and release-price schedule. Switchboard can test the funding consequence and lender options; your tax adviser remains the person who confirms whether the margin scheme applies.
Frequently asked questions
The GST margin scheme works GST out on the margin between what you paid for an interest in land and what you sell it for, rather than on the full sale price. The Australian Taxation Office states that the GST normally payable on a property sale is one eleventh of the total sale price, and that under the margin scheme it is one eleventh of the margin instead. For a developer that is a funding fact as much as a tax one, because it decides how much of each sale price survives to repay debt and therefore what a lender can size a facility against. It applies to a sale of a freehold interest, a stratum unit, or the grant or sale of a long term lease, and only where the supplier and the recipient have agreed in writing that it is to apply, under section 75-5(1). Whether you are eligible, and how the margin is worked out on your acquisition, are questions for your accountant or registered tax agent.
You cannot use it where the parties never agreed in writing that it would apply, and you cannot use it where the property came to you through a supply that was ineligible for the scheme. Section 75-5(2) denies the scheme where you acquired the entire interest, unit or lease through an ineligible supply, and section 75-5(3) lists seven ways a supply becomes ineligible. The Australian Taxation Office puts the same point plainly: if you were charged the full rate of GST when you originally purchased the property, the margin scheme cannot be used when you sell it, because you would have claimed that GST back. If the answer is no, the correction lands on the revenue line in your feasibility, not on the cost side.
Eligibility is decided by how you acquired the site, not by how you would like to sell it. If you bought from a seller who was not registered and not required to be registered for GST, or the GST on your purchase was itself worked out under the scheme, the scheme is generally still available to you. If you bought through one of the ineligible routes in section 75-5(3), it is not, and no amount of drafting at the sale end changes that. Test it against the acquisition documents before the numbers in the feasibility your lender tests harden.
No. The 7% figure is the settlement withholding amount for a margin-scheme supply of new residential premises or potential residential land, not the seller's final GST liability. Under the margin scheme, GST is generally one eleventh of the margin. In the Australian Taxation Office's own example, 7% of a $900,000 sale produces $63,000 of withholding while the GST liability on the $400,000 margin is $36,363, with the difference reconciled through the activity statement. For funding, use 7% to understand the cash that will not reach the settlement account, and use the actual margin-scheme calculation for the tax liability.
A GST loan is the informal name for short term borrowing used to cover the GST payable on a property acquisition until the credit comes back through the activity statement. It exists because on a taxable acquisition the buyer has to fund the GST on the day the purchase settles, while a commercial facility is normally sized on the base purchase price, so the gap has to come from somewhere. The important qualifier is that the gap only exists where there is a credit to wait for. Where you buy under the margin scheme there is no credit at all, so there is no refund to borrow against and the GST is simply part of the price. There is more on both cases in funding the GST on the site.
It depends on which treatment the sale falls under, because a commercial sale can be fully taxable, worked out under the margin scheme, GST-free or input taxed, and each leaves a different amount in your hands. The withholding obligation at settlement attaches to new residential premises and potential residential land, so a straightforward commercial purchase is usually settled without a withheld amount and the GST is dealt with through the activity statement instead. One consequence that catches registered buyers is that where the seller uses the margin scheme, the buyer cannot claim a GST credit on the purchase at all. That timing and credit question is the practical issue on a commercial purchase, not the rate. The treatment on your contract is a question for your accountant, and what it does to your borrowing is covered in commercial property lending.
Yes, but only the time, and only in narrow circumstances. Section 75-5(1A) allows the agreement to be made within such further period as the Commissioner allows, and PS LA 2005/15, current version 24 July 2025, says the discretion may be exercised where all the other requirements to apply the scheme are met, neither party has reported GST on the basis that the scheme does not apply, and there is no arrangement producing an outcome contrary to the policy of the legislation. The same document is explicit that the discretion cannot alter the circumstances under which the scheme can be applied, and any decision to exercise it must be approved by an Executive Level 1 officer or above. Refusing or allowing a further period is a reviewable GST decision, so a refusal can be objected to, and the funding consequence is set out in what happens when the clause was missed.
The withheld amount goes to the Australian Taxation Office, not to the mortgagee, and that is exactly why a release price set on the gross contract price falls short. Where a mortgagee sells the property in possession, Australian Taxation Office guidance current at 20 June 2025 states that from 1 July 2018 the buyer of new residential premises or potential residential land that is a taxable sale withholds the GST amount and pays it to the Australian Taxation Office instead of to the mortgagee. On an ordinary sell down the same mechanic applies to you: the withheld amount never reaches your account and never reaches your lender, so the release price has to be built on what actually arrives. That is the arithmetic behind a settlement shortfall.
Renting stock you built to sell changes the extent of creditable purpose and can claw back construction credits through an adjustment. GSTR 2009/4, consolidated version current at 18 March 2026, treats whether premises are held for the purpose of sale as an objective question decided on a weighing up of the evidence, and lists marketing of the premises for sale first among the factors the Commissioner would expect to see. Leaving stock genuinely on the market while it is leased is treated differently from taking it off the market altogether. Because the trigger is usually a facility running out of time rather than a change of plan, read it alongside the signals that point to a residual stock refinance.
A mortgagee can apply the margin scheme only if the mortgagor could have. Australian Taxation Office guidance current at 20 June 2025 states that a mortgagee in possession is liable for GST where it sells the property to pay off the mortgagor's debt and the sale would have been subject to GST had the mortgagor sold it, and that the mortgagee may apply the margin scheme where the mortgagor could have applied it. In practice that means your own eligibility follows the property into the hands of a lender exercising power of sale, so an ineligible acquisition is a problem for your lender's recovery as well as for your feasibility. It is one more reason the acquisition documents belong on the file before a development facility is sized.
No. Australian Taxation Office guidance, last updated 19 August 2021, states that when buying property where the margin scheme was used you cannot claim a GST credit for the GST included in the purchase price, even if it was for business purposes. Two things follow for funding. First, if you bought your site under the margin scheme there is no refund coming, so there is no timing gap to bridge and nothing for a short term facility to be secured against; the GST is simply part of the land cost. Second, when you sell under the scheme your own buyer is in the same position, which is worth knowing on commercial stock where a registered purchaser is pricing the deal on what they can recover. What that does to funding the GST on the site is set out above.
If a variation, discount or rebate changes the information in the original supplier notification before settlement, the supplier should issue a new notification and the withholding amount should be recalculated on the adjusted price. The purchaser and their representative should check the lodged property-settlement form details and amend them where required. For a developer with debt against the lot, the practical consequence is immediate: the revised withholding changes the cash available at settlement, so the release-price schedule should be updated at the same time rather than after the settlement statement arrives.
It works on the margin, so the GST is one eleventh of the difference between the acquisition and the sale rather than one eleventh of the whole price. That flows straight through to settlement: on a taxable sale of new residential premises or potential residential land the buyer withholds 1/11th of the contract price and pays it to the Australian Taxation Office, and where the margin scheme applies the withheld amount is 7% of the contract price instead, per Australian Taxation Office guidance current at 4 June 2025. The agreement to apply the scheme has to be in writing and made on or before the supply, or within such further period as the Commissioner allows. The calculation method itself belongs with your GST adviser, not with your broker.
Yes. Australian Taxation Office guidance states that a supplier of residential premises or potential residential land must notify the purchaser in writing before settlement whether or not they have a withholding obligation, advise whether an amount must be withheld from the contract price, and state the withholding amount. This is called a supplier notification and it can sit in the sales contract or in a separate document. Where a withholding obligation exists the notice must include the name and Australian Business Number of all suppliers, the amount they must withhold rounded down to the nearest dollar, when it must be paid, and the GST inclusive contract price; where there is no obligation the notice must say so clearly. An amended notice must be given if the first was wrong, and a supplier who fails to give one may incur a strict liability offence or an administrative penalty of 100 penalty units. It is the seller's obligation, not the buyer's, even though the buyer lodges the two forms, and what has to be in it is set out above.
The valuer has to tell you, and that is the practical answer: under ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, effective 1 January 2025, the valuer must report the GST status of their valuation. The same guidance paper prescribes the exact form of words for New Zealand only, and it does not mention the margin scheme anywhere, so on an Australian development the GST status is stated but its interaction with the margin scheme is not. The paper also says it is not generally appropriate for the valuer to recommend a maximum or minimum loan percentage, which means the valuer supplies the value and its GST status and the lender applies the ratio. Read the GST status line on your report before you argue about the number, and there is more in who decides gross or net.
The withholding obligation at settlement attaches to new residential premises and potential residential land, so a genuinely commercial lot is generally settled without an amount being withheld and the GST is dealt with through the activity statement instead. That does not mean the building has one GST answer. The Australian Taxation Office states that the margin scheme can be applied to the taxable part of a mixed supply, that where a property was obtained through two or more individual purchases the rules apply purchase by purchase rather than to the whole property being sold, and that where one contract carries multiple supplies of different kinds the supplier must determine a reasonable apportionment, failing which the withholding is calculated on the total price. On a building with retail below and apartments above, assembled from more than one site purchase, the feasibility has to be built lot by lot rather than on a single blended assumption.
The honest answer is that it does not run to your settlement date, and that is the part worth planning around. PS LA 2005/15, current version 24 July 2025, sets out the conditions for the discretion and requires approval by an Executive Level 1 officer or above, but it does not set a time limit for the decision or tie it to a contract date. A refusal or an allowance is a reviewable GST decision, so an objection is available, and an objection is a further process again. For a developer with settlements booked, the practical consequence is that the funding position has to be arranged on the assumption the answer has not arrived, and corrected later if it does. Ask your registered tax agent to estimate timing on your facts, and see what the options are when settlement is close.
That is a question about your loan documents rather than about tax, and it is usually answered before the tax question is. Facilities written for a sell down commonly require the lender's consent to grant a lease over secured stock, and a lease can change the basis on which the security is valued, because completed stock valued for an in one line sale to a single purchaser is not valued the same way as tenanted stock. Leasing can also affect a covenant tied to sales rates or to the facility's expiry. Ask your broker to read the consent and leasing clauses in the facility agreement before you sign a tenant up, since the leasing decision and the refinance decision are usually the same decision.
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