A property developer in Queensland sells a new townhouse for $550,000 including GST. The developer is registered for GST and the margin scheme does not apply. What amount of GST must be remitted to the ATO?

Q: What is the correct answer to: A property developer in Queensland sells a new townhouse for $550,000 including GST. The developer is registered for GST and the margin scheme does not apply. What amount of GST must be remitted to the ATO?

The correct answer is $50,000. Option B is correct because GST on GST-inclusive sales is calculated as 1/11th of the total price. This formula derives from the mathematical relationship where if GST is 10% of the net price, then GST equals 1/11th of the gross price. Therefore: $550,000 ÷ 11 = $50,000. This calculation method is mandated under the GST Act and applies to all new residential property sales by registered developers where the margin scheme doesn't apply.

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

Under Australian GST law, new residential properties sold by registered developers are subject to 10% GST. When a price is quoted as GST-inclusive, the GST component equals 1/11th of the total price. This mathematical relationship exists because: if net price = $500,000 and GST = 10% × $500,000 = $50,000, then gross price = $550,000, and $50,000 ÷ $550,000 = 1/11th. The margin scheme is an alternative calculation method available for certain property transactions, but when it doesn't apply, the standard 1/11th rule applies. Developers can claim input tax credits for GST paid on construction materials and services.

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

Remember 'ELEVEN HEAVEN' - when you see a GST-inclusive price, divide by 11 to find the GST amount. Think of it as 'going to heaven' (getting the right answer) by using the number 11. The 11 represents the mathematical relationship: 10 parts net price + 1 part GST = 11 parts total. When you see any GST-inclusive price on the exam, immediately think 'ELEVEN HEAVEN' and divide the total by 11 to find the GST component. This works for any GST-inclusive amount in Australian property transactions.

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

For GST-inclusive prices, always divide by 11 to find GST amount. Don't multiply by 10% - that's for GST-exclusive prices. Look for keywords like 'including GST' or 'GST-inclusive' as your trigger to use the 1/11th rule.

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

A property developer in Brisbane completes a new apartment complex and sells units for $650,000 each including GST. When preparing BAS returns, the developer must calculate GST liability: $650,000 ÷ 11 = $59,091 GST per unit. The developer can offset this with input tax credits claimed on construction costs, materials, and professional services. Accurate GST calculation is essential for cash flow management, pricing strategies, and compliance with ATO requirements. Settlement agents also need this knowledge to prepare accurate settlement statements.

Question

Finance TaxationGST On PropertyQLDHARD

A property developer in Queensland sells a new townhouse for $550,000 including GST. The developer is registered for GST and the margin scheme does not apply. What amount of GST must be remitted to the ATO?

Answer Options

A

$55,000

B

$50,000

C

$45,000

D

$0 - no GST applies to residential property