A developer sells a new apartment for $750,000 including GST. The developer is registered for GST and the purchaser is not eligible for any GST exemptions. How much GST is included in this sale price?

Q: What is the correct answer to: A developer sells a new apartment for $750,000 including GST. The developer is registered for GST and the purchaser is not eligible for any GST exemptions. How much GST is included in this sale price?

The correct answer is $68,182. Option A is correct because when calculating GST included in a GST-inclusive price, you divide the total by 11. The formula is: GST component = Total price ÷ 11. Therefore: $750,000 ÷ 11 = $68,182. This represents exactly 10% GST of the GST-exclusive price ($681,818). The division by 11 accounts for the fact that the GST-inclusive price represents 110% of the original GST-exclusive amount, so 1/11th equals the 10% GST component.

Q: What background knowledge is needed for this Finance Taxation question?

Under Australian GST legislation, new residential properties are subject to 10% GST when sold by registered developers. The GST can be calculated as either GST-exclusive (GST added to base price) or GST-inclusive (GST component within total price). For GST-inclusive calculations, the formula is Total ÷ 11 = GST component, because the inclusive price represents 110% of the original amount. The GST-exclusive price would be Total ÷ 1.1. This applies to new residential properties, with different rules for commercial properties and established residential properties. Understanding these calculations is essential for settlement statements and compliance.

Q: What is a good way to remember the answer to this Finance Taxation question?

Remember 'Divide by ELEVEN to get GST from HEAVEN' - when the price includes GST (GST-inclusive), always divide by 11 to extract the GST component. Think of it as the 'heavenly' price includes everything, and you need to divide by 11 to find the GST portion. When you see a GST-inclusive price in an exam question, immediately think 'Eleven Rule' and divide the total by 11. If the question asks for GST to be added to a price, multiply by 0.1 instead.

Q: What exam tip applies to this Finance Taxation question?

Look for keywords like 'including GST' or 'GST-inclusive' - this signals to divide by 11. If it says 'plus GST' or 'excluding GST', multiply by 0.1 to add GST.

Q: How does this Finance Taxation concept apply in Australian real estate practice?

A property developer markets a new apartment at $750,000 'including GST'. When preparing the contract of sale and settlement statement, the conveyancer must correctly identify that $68,182 represents the GST component. This affects the developer's BAS lodgement, determines the actual sale proceeds after GST remittance to the ATO, and ensures accurate disclosure to the purchaser. Incorrect GST calculations can lead to compliance issues, incorrect financial reporting, and potential disputes at settlement.

Question

Finance TaxationGSTHARD

A developer sells a new apartment for $750,000 including GST. The developer is registered for GST and the purchaser is not eligible for any GST exemptions. How much GST is included in this sale price?

Answer Options

A

$68,182

B

$75,000

C

$67,500

D

$70,000