Developers

Published 5 August 2026 · Last updated 5 August 2026

Property development is where quantity surveying and tax strategy intersect most heavily, and where the cost of getting either wrong is measured in project margins, not tax refunds. Before a site is purchased, feasibility depends on construction cost estimates that survive contact with tenderers. During delivery, lenders require independent cost reports and progress certification. And at completion, the tax character of the whole exercise — trading stock or capital asset, margin scheme or full GST — was quietly decided by choices made back at acquisition.

The tax classification question comes first because it drives everything else. A developer selling completed stock is trading, not investing: profits are ordinary income, the properties are trading stock, and the CGT discount is off the table. But the same person holding a completed build-to-rent asset is in capital territory, with depreciation entitlements a builder-to-sell never gets. The ATO classifies by intention and conduct, not by what the taxpayer prefers afterwards — and one-off subdividers sit on a genuinely fine line the guides below map in detail.

GST is the second structural decision. New residential premises attract GST on sale; the margin scheme can substantially reduce it but must be agreed before settlement of the original acquisition in most cases, and it interacts with how the site was purchased. Meanwhile input tax credits on construction costs flow only to the extent of the intended taxable use — which changes if a built-to-sell project pivots to renting.

Where Koste fits

We work the cost side: feasibility-stage construction estimates, lender-grade cost reports, progress claim certification, and — for developers who retain stock — depreciation schedules prepared from the actual construction cost data, which produces materially better claims than post-completion estimation. The guides below run the full arc: feasibility, classification, structure, GST, depreciation, and delivery risk through to defect liability.

Who this guide is for

Property developers from one-off subdividers to multi-stage operators, builders retaining completed stock, build-to-rent sponsors, and the accountants, brokers and project managers supporting development projects. Investors buying a completed new property should start with the Buying Property category instead.

Key concepts

Trading stock vs capital asset

Developments built to sell are trading stock — profits are ordinary income with no CGT discount. Retained assets are capital, with depreciation entitlements. Intention at acquisition, evidenced by conduct, decides.

Margin scheme

GST calculated on the margin over acquisition cost rather than the full sale price — often the difference between a viable and unviable project, but eligibility depends on how the site was acquired.

Feasibility discipline

A feasibility is only as good as its construction cost line. Independent QS estimates at concept and DA stage prevent the most common development failure: costs discovered at tender.

Depreciation on retained stock

Developers who hold completed product claim Division 43 and 40 from actual cost records — the best possible schedule basis. Built-to-sell stock generates no depreciation for the developer.

Delivery risk chain

Progress certification, practical completion, defect liability and statutory warranty periods each shift risk between parties — and each has documentation requirements that outlast the project.

Common mistakes

Deciding the tax structure after acquiring the site — trading stock/capital and margin scheme positions are largely locked in at purchase.
Running feasibility on rate-per-square-metre guesses and discovering real construction costs at tender.
Missing margin scheme eligibility (or the required agreement in the contract) and paying GST on the full sale price.
Claiming input tax credits on construction costs without tracking intended use — a pivot from selling to renting triggers GST adjustments.
Retaining stock to rent but never getting a depreciation schedule, despite holding the actual construction cost records that maximise the claim.

Key legislation

s6-5 / s15-15 ITAA 1997 — ordinary income and profit-making schemes — the basis for taxing development profits as income, not capital.

Division 70 ITAA 1997 — trading stock rules applying to property held for sale in a development business.

Division 75 GST Act — the margin scheme for eligible property sales.

Division 129 GST Act — adjustments when the extent of creditable purpose changes — the built-to-sell-then-rent trap.

Divisions 40 & 43 ITAA 1997 — depreciation entitlements on retained (not built-to-sell) stock.

Start with these guides

What is a Development Feasibility Study?

A development feasibility study evaluates the viability of a property development project. It considers costs, potential revenue, market demand, and regulations. This study helps d…

What is a Construction Cost Report and Why Developers Need One

A Construction Cost Report provides a detailed breakdown of all costs associated with a construction project. It helps developers manage budgets, secure financing, and ensure proje…

How GST Works for Property Developers in Australia

GST for property developers involves charging GST on sales of new residential and commercial properties and claiming GST credits on related expenses. Developers may use the margin …

Difference Between Trading Stock and Capital Asset for Developers

In Australia, developers must distinguish between trading stock and capital assets for tax purposes. Trading stock refers to properties intended for sale in the ordinary course of …

Feasibility and project economics

Tax classification and structures

GST for developers

Depreciation on developments

Delivery, titles and risk

When to get professional advice

Engage a quantity surveyor at feasibility stage — before the site is committed — and again for lender cost reports and progress certification during delivery. Get structuring, GST and classification advice from your accountant before exchange on the site, because the margin scheme and trading stock positions cannot be retrofitted. For retained stock, order the depreciation schedule at practical completion while the cost records are complete and current.

Frequently asked questions

Do I pay CGT or income tax on my development profit?

Usually income tax — a development carried on for profit produces ordinary income with no CGT discount, even for a one-off project. Genuine capital treatment generally requires holding the asset, and the line for small subdividers is fact-specific.

Can I claim depreciation on townhouses I built to sell?

No — trading stock generates no depreciation for the developer. If you retain some units to rent, those become depreciable, with schedules built from your actual construction costs.

What does the margin scheme actually save?

GST becomes 1/11th of your margin over the site’s acquisition cost instead of 1/11th of the full sale price. On land purchased without GST credits, the saving is substantial — but the contract must apply the scheme and the acquisition history must qualify.

When do lenders require a QS cost report?

Most construction financiers require an independent cost report before drawdown and progress certification throughout the build. Getting the QS engaged early avoids funding delays at the first claim.

What happens if I build to sell but end up renting the units?

A GST adjustment under Division 129 can claw back input tax credits claimed during construction, and the properties may shift from trading stock treatment. Take advice before listing them for rent, not after.

Tools and calculators

Construction Cost Calculator Stamp Duty Calculator Tax Depreciation Calculator