Property developers renting newly built homes
It is common for property developers to hold stock and rent it out. This is especially the case if the market is slowing down, or if the owners development model is to retain property at the completion of each development rather than cashing in profits.
GST can still apply to this approach, even well after the project has finished. Lets take twelve Joondalup apartments settle down to eight sales and four that will not move. The agent suggests renting the four for a year to cover holding costs. It is a reasonable commercial call.
It is also a change of use for GST, and it starts an obligation that runs for years. GST should inform the letting decision alongside rental income, holding costs and sale prospects. The aim here is to understand the GST and cashflow consequences of that decision, not to make it on GST alone.
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Follow the link below to start from the beginning.
Why leasing costs you GST credits
You claimed GST on land, construction and materials because you intended to sell new residential premises, a taxable supply. Leasing residential premises is input taxed. Once the use changes, the GST credits no longer match what you are doing.
As your intention has changed, you have to pay back the GST you claimed earlier.
You have done nothing wrong until you fail to report the adjustment. The credits were claimed on a genuine intention. The duty now is to recognise the change and report it in the right period.
The Commissioner clarified in March 2026 that the five years must be continuous, and that time held or marketed for sale is excluded. The two routes do not run together. A developer has to choose and be able to show which choice was made.
Building to lease from the start is a different question. Those supplies are input taxed and construction credits should not be claimed. That position needs settling before the first credit.
How the adjustments are timed
Adjustments run over adjustment periods ending 30 June, starting at least twelve months after the period of the purchase. Take a materials invoice claimed in April 2015. A monthly reporter has a first adjustment period of June 2016. A quarterly reporter has April to June 2017, because the 2016 quarter starts too early.
How many periods depends on the purchase value: two up to $5,000, five up to $500,000, ten at $500,000 and above. Nothing arises under $1,000. Large acquisitions run for a decade.
One invoice, two outcomes
These figures show how one invoice is treated under stated assumptions. They are not an estimate for the four apartment project. The invoice is the April 2015 one above: $50,000 plus GST, a $5,000 credit, monthly BAS reporting, the home completed June 2015 and leased from January 2017. June 2016 is the first adjustment period, and nothing arises in it because the developer is still trying to sell the property. The later start of leasing produces the first letting related adjustment in the June 2017 period.
Still for sale, $500,000 sale value, $8,000 rent to June 2017: adjustment of about $79 in the June 2017 period.
Off the market: $1,111 in the June 2017 period, $1,197 in June 2018, about $3,333 over the five periods.
A review applies the relevant treatment to the project’s actual acquisitions and their timing. Each has its own value, its own period count and its own start date, so the project figure is a schedule, not a multiple.
Short stay letting does not change the answer
Letting an apartment short stay does not make it commercial residential premises. The question is whose supply you are looking at. An operator running a whole complex as a resort may make taxable supplies to guests. The owner’s lease of an apartment to that operator stays input taxed.
The ATO released a draft update to its commercial residential ruling in November 2025 covering build to rent, student housing, boarding houses and manager accommodation, proposed to apply backwards as well as forwards. If your holding sits there, take advice now and review it when the ruling is final.
Before the first tenant signs
- Decide whether the stock stays on the market or comes off, and record the decision and the reasons
- If it stays on the market, set up the evidence: agent listing, realistic price, inspection rights in the lease
- Identify which acquisitions carry adjustments and for how many periods
- Diarise the 30 June reporting for each year the position runs
- If any unit might be held to the five year point, decide that now, because the clock only runs off market
Questions We Are Asked
Yes. The adjustment may be small if the property is genuinely still for sale, but reporting it is not optional.
No. Time marketed for sale does not count. The two routes are alternatives.
It can change who is liable for the GST. That is covered in the companion article on development agreements.
GST position on unsold stock
You receive the adjustments under each route on your actual acquisitions, the evidence the on market route requires, and a reporting calendar.
To start, tell us how many units, when they completed and whether any are already tenanted.
The scope and fee are agreed first and depend on the decision you need to make and the information already available.
Already leasing? Tell us since when, and we will set out what needs reporting and by which 30 June.
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