Funding GST on a Commercial Property Purchase in Australia
GST can materially increase the cash required to settle a commercial property acquisition. The finance strategy must start with the contract’s actual GST treatment, then reconcile purchase price, duty, adjustments, lender deductions and verified borrower funds.
For a focused overview of eligibility, funding costs and the enquiry process, explore our GST funding for commercial property purchases service.
Commercial and business-purpose finance only. Subject to lender assessment, valuation, documentation, security, legal due diligence and settlement readiness. Approval, tax treatment, GST credits and settlement timing are not guaranteed. Obtain advice from a registered tax agent and property lawyer.
The phrase “plus GST” can change an acquisition’s settlement requirement by a substantial amount. A purchaser should not assume that a future GST credit will fund today’s settlement, that every commercial sale is taxable, or that a going-concern clause automatically makes the transaction GST-free.
Why can GST become a commercial-property funding hurdle?
Where a contract price is expressed as an amount plus GST, the purchaser may need to fund the GST component at settlement in addition to the price, transfer duty, legal costs, adjustments and finance costs. Even where the purchaser expects to claim a GST credit, the timing and availability of that credit depend on the GST law, the purchaser’s circumstances, documentation and activity-statement process.
Settlement comes first
The vendor and settlement process require cleared funds on the contractual settlement date. A later tax credit is not cash available today.
Contract wording controls risk
The price may be GST-inclusive, plus GST, subject to a going-concern clause or governed by another GST mechanism.
Credit may be unavailable
Registration, creditable purpose, tax invoices, margin-scheme treatment and other rules can affect whether a credit may be claimed.
Duty and costs remain
Transfer duty, registration, rates adjustments, legal expenses and lender deductions can sit beside the GST issue.
Do not size the loan from the advertised price. Start with the signed contract and a written tax and settlement calculation prepared by the purchaser’s advisers.
How might GST apply to a commercial property transaction?
Taxable supply
The sale may be taxable and the contract may require GST in addition to, or within, the stated price. Obtain advice on the exact calculation.
GST-free going concern
A leasing or other enterprise may qualify where all statutory conditions and factual requirements are satisfied.
Margin scheme
The margin scheme may apply to an eligible taxable real-property sale where the legal requirements and written agreement are satisfied.
Input-taxed or non-taxable outcome
Other treatment may apply depending on the property, supplier, use and transaction. Classification requires professional advice.
These treatments are not interchangeable labels. They affect the settlement amount, tax invoices, potential credits, contractual protections and lender’s sources-and-uses statement.
If the sale is taxable, can the purchaser claim the GST back?
A GST-registered purchaser may potentially claim a GST credit where the acquisition is for a creditable purpose and the statutory requirements are met. The purchaser may need a valid tax invoice when claiming the credit. Private, input-taxed or other non-creditable use can reduce or prevent the entitlement.
The credit is not necessarily available at settlement and should not be treated as unconditional cash until the purchaser’s registered tax agent confirms the treatment, documentation and expected reporting period.
Funding question: If the GST credit is expected after settlement, what facility or verified cash source bridges the timing gap, and how will that bridge be repaid?
When can a commercial property sale be GST-free as a going concern?
The ATO states that a commercial-premises sale may be GST-free as a going concern where the required conditions are satisfied. These include the supplier providing all things necessary for the continued operation of the enterprise, carrying on the enterprise until the day of supply, the supply being for consideration, the purchaser being registered or required to be registered for GST, and the parties agreeing in writing that the supply is of a going concern.
- identify the enterprise being supplied, such as a leasing enterprise;
- confirm which leases, agreements, assets and operational elements must transfer;
- verify the purchaser’s GST registration status at the required time;
- ensure the written agreement is completed on or before the day of supply;
- confirm the supplier continues the enterprise until supply;
- review any vacancy, lease termination, nomination or contract variation; and
- include a contractual response if the ATO later determines the supply was taxable.
A written clause alone is not conclusive if the factual requirements are not met. The ATO’s public ruling states that the transaction depends on all circumstances, including whether everything necessary for the enterprise is supplied.
Finance implication: The lender should still understand the potential GST fallback. If going-concern treatment fails, who must pay the GST, when is it payable and is there sufficient funding?
What does the margin scheme mean for the purchaser?
The margin scheme is a method for calculating GST on an eligible taxable real-property sale. The ATO explains that the required written agreement generally needs to be made before settlement. Eligibility and calculation depend on the transaction and the property’s acquisition history.
Not simply 1/11 of the price
Under the scheme, the supplier’s GST is generally calculated by reference to the margin rather than the full sale price.
No purchaser GST credit on price
The ATO states that a purchaser cannot claim a GST credit for GST included in a property price where the margin scheme applies.
Written agreement matters
The parties must satisfy the relevant written-agreement and eligibility requirements.
Funding model changes
The purchaser should not build its exit or working-capital plan around a GST credit that is unavailable.
Because the margin scheme can materially change both vendor liability and purchaser credit assumptions, the contract should be reviewed by advisers before finance terms are finalised.
Does the purchaser need to withhold GST at settlement?
The ATO’s GST-at-settlement regime primarily applies to certain taxable sales of new residential premises and potential residential land. It is not a universal withholding rule for every established commercial property acquisition.
Where the regime applies, the supplier must provide written notification and the purchaser generally pays the required withheld amount directly to the ATO and the remaining balance to the supplier. The purchaser or authorised representative may need to lodge the prescribed forms and use the payment and lodgment reference numbers.
Mixed-use sites, development land and property capable of residential development require careful classification. The purchaser should obtain the supplier notification and professional advice rather than infer the withholding treatment from the marketing description.
Separate two questions: GST liability under the contract and purchaser withholding under the GST-at-settlement regime are related but distinct issues.
How should the commercial acquisition funding requirement be calculated?
The legal representative, tax adviser and finance adviser should reconcile the same written funds flow. Every figure should state whether it is GST-inclusive, GST-exclusive or subject to a disputed or conditional treatment.
Minimum net acquisition finance = contract amount payable + GST funded at settlement + duty, adjustments and approved transaction costs − deposit, cleared borrower contribution and other confirmed sources.
Potential uses of funds
- purchase-price balance;
- GST payable under the contract;
- transfer duty and registration;
- rates, land tax, rent and outgoings adjustments;
- existing debt or caveat payouts where relevant;
- valuation, legal and lender costs;
- approved fit-out or working capital; and
- a justified contingency accepted by the lender.
Verified sources
- net proceeds of the acquisition facility;
- cleared borrower contribution;
- deposit already paid and recognised;
- verified equity release from other property;
- a specifically approved GST bridge;
- another coordinated facility; and
- other unconditional settlement funds.
Expected GST credits should be shown separately as a potential post-settlement repayment source only after the tax adviser confirms the basis, amount, timing and documentation.
How may the GST and acquisition funding gap be addressed?
Commercial acquisition loan
A first-mortgage facility over the property being acquired, sized against value, total cost, borrower and repayment capacity.
Short-term GST bridge
A temporary component may fund an evidenced GST timing gap where the potential credit and repayment process are acceptable.
Equity release
Acceptable equity in another property may provide the purchaser contribution, GST amount or transaction costs.
Second-mortgage business finance
Supplementary capital behind an existing first mortgage may be considered subject to value, ranking, consent and exit.
Bridging finance
Short-term funding may bridge between acquisition settlement and a documented sale, refinance or another defined liquidity event.
Multiple-property structure
More than one acceptable property may support the transaction, with ownership, value, debt and release conditions documented.
The funding structure should reflect the actual GST treatment. Finance for a taxable acquisition with a confirmed post-settlement credit is different from finance where the margin scheme applies and no purchaser credit is available.
What security may support the acquisition?
Acquisition property
The commercial property may secure the facility where title, value, condition, use, lease profile and marketability are acceptable.
Existing commercial property
Another office, retail, industrial or specialised property may provide additional security and equity support.
Investment residential property
Eligible investment property may secure genuine business-purpose finance, subject to lender criteria.
Development land
Planning, zoning, services, GST withholding, intended development, valuation and exit require detailed review.
Security value does not determine approval by itself. The lender considers the borrower, property, total exposure, purpose, settlement mechanics and credible repayment exit.
What will a commercial lender assess?
Contract and GST treatment
Complete contract, GST clauses, going-concern or margin-scheme agreement, supplier notification and professional advice.
Borrower
Entity, directors, trustees, beneficial owners, experience, financial position, business plan and requested guarantees.
Property
Title, valuation, use, leases, vacancy, condition, planning, environmental matters, insurance and marketability.
Net funds
Purchase price, GST, duty, adjustments, lender deductions, deposit, contribution and other verified sources.
GST-credit assumptions
Registration, creditable purpose, tax invoice, reporting timing and confirmation from the purchaser’s tax adviser.
Exit and serviceability
Business cash flow, rental income, refinance, property sale or another evidenced repayment pathway.
Low-documentation commercial finance does not mean no assessment. A lender may accept alternative evidence but still needs a coherent acquisition, GST and repayment case.
How will any GST bridge or short-term component be repaid?
A post-settlement GST credit may be one potential repayment source only where advisers confirm the entitlement and timing. The lender may also require a fallback if the credit is delayed, reduced, offset against other tax liabilities or unavailable.
- verified GST credit supported by tax advice and required documents;
- business cash flow or rental income;
- bank or non-bank refinance;
- sale of another property or business asset;
- equity contribution from a verified source; and
- a contingency where the expected credit is delayed or not available.
From contract review to settlement
Review the contract
Confirm the price, GST clause, settlement date, adjustments and tax mechanisms with advisers.
Confirm tax treatment
Obtain written advice on taxable supply, going concern, margin scheme, credits and withholding.
Build sources and uses
Calculate every settlement use and verified source, including gross-to-net lender deductions.
Assess borrower and security
Provide entity, financial, property, lease, valuation and existing-debt information.
Structure the facility
Consider acquisition debt, GST bridge, equity release or coordinated sources, subject to approval.
Complete conditions
Satisfy valuation, credit, legal, identity, insurance, tax and documentation requirements.
Settle and execute the exit
Coordinate cleared funds and immediately track any GST credit or other short-term repayment source.
Prepare the commercial-property GST funding file
- complete signed contract, GST annexure, special conditions and variations;
- written advice from a registered tax agent on the proposed GST treatment;
- going-concern or margin-scheme agreement where relevant;
- supplier notification and withholding information where applicable;
- current settlement statement and itemised sources and uses;
- deposit and cleared borrower-contribution evidence;
- borrower, guarantor, company, trust and identification documents;
- GST-registration and business-purpose evidence;
- current title, valuation and property access arrangements;
- leases, rent schedule, outgoings, planning and insurance;
- existing mortgage statements and payouts for additional security;
- tax-invoice and expected-credit analysis where a GST bridge is proposed;
- legal representative, tax adviser and settlement contact details; and
- base-case and fallback repayment exits.
Taxable warehouse acquisition with a GST timing gap
A GST-registered trading company contracts to purchase an owner-occupied warehouse under a taxable contract. Its registered tax agent advises on the potential GST credit and expected reporting process, while the property lawyer confirms the amount payable at settlement.
The borrower provides the contract, tax advice, settlement calculation, entity documents, business financials, valuation access and cleared contribution. A proposed acquisition facility and separate short-term GST component are assessed against the warehouse and an additional investment property.
The intended exit for the GST component is the confirmed credit when received, with business cash flow as a fallback. The long-term acquisition debt is intended to refinance to a conventional commercial facility once post-settlement conditions are satisfied.
Hypothetical example only. It is not tax advice, a completed transaction, offer, approval, GST-credit confirmation or settlement promise.
Explore connected commercial funding options
GST and commercial-property finance questions
Can GST be included in a commercial property loan?
Potentially. A lender may consider an acquisition facility, short-term GST component or another property-backed structure, subject to the contract, tax advice, security, net funds and repayment exit.
Can I use the expected GST credit to repay the loan?
Potentially, but entitlement, amount, documentation and timing must be confirmed by a registered tax agent. The lender may require a fallback if the credit is delayed, reduced or unavailable.
Is every commercial property sale subject to GST?
No. Treatment depends on the supplier, purchaser, property, enterprise and contract. The transaction may be taxable, GST-free as a going concern or subject to another treatment. Obtain professional advice.
Does a going-concern clause automatically make the sale GST-free?
No. The written agreement is only one requirement. The factual and statutory conditions must also be satisfied, including the continued operation and supply of everything necessary for the enterprise.
Can a purchaser claim a GST credit under the margin scheme?
The ATO states that a purchaser cannot claim a GST credit for GST included in the property price where the margin scheme applies.
Does indicative finance guarantee the GST amount will be funded?
No. Finance remains subject to final approval, confirmed tax treatment, valuation, legal due diligence, executed documents, conditions precedent, cleared funds and settlement coordination.
Australian Taxation Office resources
Does GST create a gap in your commercial property acquisition?
After obtaining tax and legal advice, provide the contract, GST treatment, settlement calculation, borrower details, proposed security, required net funds and repayment exit. Basic Finance Loans can discuss potential commercial funding pathways, subject to assessment.
General information only. This article is not tax, legal, accounting, financial or credit advice. GST outcomes depend on the transaction and the parties’ circumstances. Consult a registered tax agent and qualified property lawyer.