A property developer in Victoria sells a new apartment for $750,000 including GST. The developer is registered for GST. What is the GST component that must be remitted to the ATO?

Q: What is the correct answer to: A property developer in Victoria sells a new apartment for $750,000 including GST. The developer is registered for GST. What is the GST component that must be remitted to the ATO?

The correct answer is $68,182. Option B is correct because when a sale price includes GST, the GST component is calculated as the total price divided by 11. This follows from the mathematical relationship where if the GST-exclusive price is X, then X + 10% of X = 1.1X = total price including GST. Therefore, GST = total price ÷ 11. Applying this formula: $750,000 ÷ 11 = $68,182. This represents the exact GST amount that must be remitted to the ATO under the GST Act.

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

GST in Australia is levied at 10% on most goods and services under the A New Tax System (Goods and Services Tax) Act 1999. For new residential premises and commercial property, developers must charge GST on sales. When calculating GST from a GST-inclusive price, the formula is: GST amount = Total price ÷ 11, and GST-exclusive price = Total price ÷ 1.1. This is because adding 10% GST to a base price creates a total that is 110% of the original, making the GST component 10/110 or 1/11th of the total. Property professionals must understand this for accurate BAS reporting and ATO compliance.

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

Remember 'GST Included? Divide by ELEVEN!' Think of it as the 'elevator rule' - when GST goes up to the 11th floor (included in price), you divide by 11 to find the GST component. The number 11 represents the total (10 parts original price + 1 part GST = 11 parts total). When you see a GST-inclusive price in an exam question, immediately think 'elevator to floor 11' and divide the total by 11 to find the GST component. If asked for the GST-exclusive price, multiply the result by 10.

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

For GST-inclusive prices, always divide by 11 to find GST component. For GST-exclusive prices, multiply by 0.1 (10%) to find GST. Double-check by ensuring GST-exclusive price + GST = original inclusive price.

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

A property developer completes a new apartment complex and sells Unit 12 for $750,000 including GST. When preparing their Business Activity Statement (BAS) for the ATO, they must correctly identify the GST component of $68,182 to remit. The GST-exclusive sale price of $681,818 represents their actual revenue. Incorrect GST calculations could result in underpayment penalties or overpayment affecting cash flow. The developer's accountant uses this calculation to ensure accurate quarterly BAS lodgments and maintain compliance with ATO requirements.

Question

Finance TaxationGST On PropertyVICHARD

A property developer in Victoria sells a new apartment for $750,000 including GST. The developer is registered for GST. What is the GST component that must be remitted to the ATO?

Answer Options

A

$75,000

B

$68,182

C

$82,500

D

$67,500