Goods and Services Tax for Business and Property Transactions
These seminar problems reproduce the substance and factual detail of the supplied GST question set. Attempt each problem before opening the model answers.
Tutorial and Applied Questions
Question 1 — Registration and mixed activities
Sophie is employed three days a week as a dentist. As a dentist, she earns $600,000 a year. In her spare time, she makes ceramic homeware products from her garage.
Sophie regarded pottery as a hobby. About 15 months ago, she began selling a few of her products online. She now maintains a website, advertises through social media and regularly attends weekend markets.
During the last 12 months, her sales were $52,000. Over the last three months, sales have averaged $6,500 per month, and Sophie reasonably expects this level of sales to continue.
Sophie also owns a residential unit which she rents to tenants for $2,000 per month.
Six months ago, Sophie began renting a separate studio adjacent to her garage to other artists on weekends. She receives $900 per month from the studio hire.
Advise Sophie whether she is required to register for GST. Would your answer be different if the pottery sales were only $45,000 per annum?
Question 2 — October GST calculation
Assume Sophie registers for GST. During October she:
- sold pottery for $8,800 GST-inclusive;
- purchased clay, glaze and other materials for $2,200 GST-inclusive from a registered supplier;
- bought a new kiln for $4,400 GST-inclusive, used solely in the pottery business;
- paid $440 GST-inclusive for website and advertising expenses;
- paid $220 GST-inclusive for mobile telephone and internet costs, which are used 60% for her business;
- gave her sister one of her vases which cost Sophie $110 GST-inclusive in materials, and which had originally been manufactured as trading stock;
- paid $550 interest on her business loan; and
- paid her casual employee wages of $1,500.
Explain the GST treatment of each transaction and calculate Sophie’s net GST liability, ignoring the residential and studio rental activities.
Question 3 — Beach Basket food classification
Oliver operates Beach Basket, a store opposite a popular Gold Coast beach. There are no tables or chairs in the store, and customers take everything away.
Oliver sells whole fresh oranges; freshly squeezed orange juice containing 100% orange juice; bottled still water; flavoured carbonated mineral water; bags of roasted coffee beans; takeaway flat whites; individual slices of chocolate cake; pre-made chicken sandwiches; and hot sausage rolls.
(a) Which items are GST-free? (b) How would the answer differ if he placed tables and chairs inside the shop and customers ate the food there? (c) Is there any other GST advice you would offer?
Question 4 — University, health and residential payments
Daniel enrols in a postgraduate engineering degree at an Australian university. He pays tuition fees; a compulsory $350 laboratory materials fee covering chemicals and components consumed during experiments; $120 for a textbook written by his lecturer which he keeps after completing the course; $1,650 for a laptop from a major retailer; $180 to a medical practitioner for a consultation that qualifies as a medical service; $380 per week to live in an ordinary residential apartment owned by the university; and $14 each time he eats a hot meal in the university cafeteria.
Explain the GST treatment of each payment.
Question 5 — Barter and non-cash consideration
Mia is a registered landscape designer. A local hotel asks Mia to redesign its courtyard. Mia would normally charge $5,500 GST-inclusive for this work. Instead, the hotel agrees to provide Mia with accommodation vouchers worth $5,500 that Mia can use for a private family holiday.
Mia tells her accountant: “No money changed hands, so there can’t be any GST.” Is Mia correct? If not, what are the GST consequences?
Question 6 — Sale of physiotherapy clinic as a going concern
Petra has operated a successful physiotherapy clinic for 12 years. She is registered for GST and plans to retire. She proposes to sell the business to River Health Pty Ltd. The sale includes the trading name, patient booking system, telephone number, website, treatment equipment, furniture, appointment records subject to privacy requirements, and goodwill.
Petra rents the clinic premises. The landlord may grant River Health a new lease. Petra proposes to stop seeing patients one week before settlement. River Health is presently not registered for GST. The contract simply states that Petra is selling “the business and assets”.
Advise Petra whether the sale can be GST-free as the supply of a going concern and identify what changes or further information are required.
Question 7 — Hire price and security deposit
A registered equipment-hire company hires a professional camera kit to Grace for $2,200 GST-inclusive. Grace pays a $550 non-refundable amount that is part payment of the hire price and a separate $1,000 security deposit refundable if the equipment is returned undamaged. Grace later pays the $1,650 balance and the company retains $440 of the security deposit for a damaged lens.
Explain the GST treatment of these payments.
Question 8 — Taxable importation
Kai operates a registered bicycle business and imports specialist racing helmets from Italy. For one shipment: purchase price $22,000; international transport and insurance $2,200; customs duty $800. Assume those amounts form the relevant value for determining GST on the taxable importation. All helmets are imported solely for resale in Kai’s Australian business.
Explain whether there is a taxable importation, the GST payable, whether Kai is entitled to an input tax credit, and the overall net GST effect of the importation itself.
Question 9 — Property development and the margin scheme
Coastal Developments Pty Ltd, a GST-registered property developer, bought a Burleigh Waters residential property in March 2024 from Margaret for $1,650,000. Margaret had owned and occupied it as her family home for more than 20 years and was not registered or required to be registered for GST.
Coastal paid acquisition costs, demolished the residence, subdivided the land into three lots and built one new residence on each. It is entitled to all available development input tax credits. In September 2026 it contracts to sell the new residences for $1,650,000, $1,760,000 and $1,870,000.
Advise whether the margin scheme can apply; what written agreement is required; whether the margin is “real profit”; calculate the margin and GST if the original $1,650,000 acquisition price is attributed equally to the three lots; consider whether eligibility changes if Margaret had been a registered developer who sold under the ordinary taxable-supply rules; and explain the purchaser’s input-tax-credit position under the margin scheme.
Question 10 — Integrated September GST revision
Amelia operates a registered catering and events business. During September she invoices $22,000 GST-inclusive for corporate catering; sells $3,300 of fresh fruit boxes for home consumption; buys $5,500 GST-inclusive of ingredients from registered suppliers; buys $1,100 of fresh fruit from an unregistered farmer; caters her brother’s birthday free of charge using business ingredients costing $550 GST-inclusive; swaps catering for professional advertising photographs, each service worth $2,200 GST-inclusive; pays $3,300 GST-inclusive rent; $770 interest; and $8,000 wages.
Advise Amelia on each transaction and calculate her net GST position for September.
Additional Revision Questions
FAQ / short answer
Explain, in no more than 250 words, why GST-free and input-taxed treatment are economically different even though neither ordinarily involves GST charged to the customer.
IRAC problem
A registered property investor sells a building containing ground-floor shops and two long-term residential apartments for one undivided price. Explain the GST issues, including mixed-supply apportionment and the different treatment of commercial and residential components.