A property developer sells a new residential unit for $550,000 including GST. The purchaser later discovers the contract did not clearly specify GST treatment. Under Australian tax law, what is the likely outcome?
Correct Answer
A) The price is treated as GST-inclusive: $500,000 plus $50,000 GST
When a contract for new residential property does not deal with GST, the price is generally treated as GST-inclusive. The $550,000 splits into $500,000 plus $50,000 GST. For new residential premises the purchaser generally withholds this GST at settlement and pays it directly to the ATO under the GST at settlement rules, and the developer is credited for it.
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