The margin scheme and your feasibility.

How GST treatment changes the numbers a lender uses — why net realisation rather than gross often drives facility sizing, and what must be settled before a feasibility is credible.

GST and feasibility

Why the margin scheme quietly rewrites a feasibility.

Two developers can build the same product on the same street and hand a credit team very different feasibilities. Often the difference is not build cost or sales evidence. It is how GST on the eventual sales has been treated, and whether anyone qualified has actually confirmed that treatment.

This page is about the finance consequences, not the tax rules. Whether the margin scheme is available to you, how it applies, and what it produces on your acquisition are questions for your accountant or registered tax adviser, never for a broker or a lender's credit analyst. Siare will not tell you whether you are eligible, and treat it as a warning sign if anyone in the finance chain offers to.

What a finance adviser can do is carry the confirmed position into the numbers, evidence it in the submission, and re-test it when something moves. An unresolved GST assumption is a common reason a feasibility comes back from credit as not yet credible, which on a time-critical acquisition amounts to much the same thing as a decline.

The mechanics

Facilities are sized off net realisation, not gross.

GRV versus NRV sounds like spreadsheet housekeeping. In a credit submission it is the difference between the number you think you are borrowing against and the number a lender is testing.

GRV

Gross realisation is the headline

Gross realisation value is the sum of expected sale prices: the agent's appraisal, and usually the top line of a first spreadsheet. A useful sanity check on the project, but rarely the figure a development facility is measured against.

NRV

Net realisation is the working number

Net realisation strips out what sits between a completed dwelling and cleared funds: agent and marketing costs, legals, and GST payable on the sales. Change the GST treatment and the net figure moves with it.

The test

The denominator moves underneath you

Many development facilities are tested against net realisation, because gross overstates the funds available to retire debt. Two projects with identical gross realisation can land very differently if one carries a confirmed GST position and the other an assumption.

Equity

The gap comes from somewhere

If net realisation lands lower than assumed, the funded amount can fall while project costs stay where they were. That gap is met by more equity, a subordinated position, a change of scope, or the deal not proceeding.

Cashflow

Peak debt is a timing question

Input tax credits on construction costs, when activity statements are lodged and refunds received, and whether GST at settlement is funded or paid from proceeds all shape the cashflow curve, and therefore peak debt. How credits are claimed in your structure is a question for your accountant.

Structure

Entity choices drive both outcomes

Which entity acquires, develops and sells shapes the GST analysis and the lending analysis at once, and the two do not always pull the same way.

Sequence

Settle the GST question before the feasibility.

A feasibility built on an unconfirmed assumption has not been stress-tested. It is a proposal waiting to be repriced.

Put the eligibility question to the right person, in writing

Before anything is modelled, take the contract of sale and the vendor's GST position to your accountant or registered tax adviser and ask formally. Eligibility can turn on how the property was acquired, what the parties agreed in writing and when, and the circumstances of the holding entity. None of that is a lending question.

State the assumption on the face of the feasibility

The feasibility should say which treatment has been assumed, who advised it, and when. One that is silent on GST reads as one that has not been checked, and an assessor who cannot see your assumption will substitute their own, usually the more conservative.

Show the bridge from gross to net

Present gross realisation, then each deduction, then the net figure, with sales evidence attached. Credit teams are not hostile to a lower net number; they are hostile to one they cannot reconstruct. Our development finance calculator is a place to sketch the shape before your adviser and quantity surveyor firm it up.

Re-test the funding structure against the net figure

Equity contribution, presale expectations, interest capitalised across the program and peak debt all move with net realisation. Re-run them against the confirmed position, before terms are sought rather than after they are issued. The feasibility calculator models the margin scheme, full GST or no GST, so once your adviser has confirmed the treatment you can see how it moves net realisation, margin and peak debt.

Keep the position current as the deal moves

Contracts get renegotiated, entities restructured, and the sales mix shifts between plan and completion. Any of that can disturb an assumption that was right when it was given. The position goes back to your adviser first and the lender second, which is much of what development finance advisory work actually is.

Evidence

What a credit team wants to see, not be told.

Assertion is cheap and assessors know it. A GST position carries weight in proportion to what sits behind it.

None of this involves Siare forming a view on your GST position. It is the evidence a funder generally needs before accepting the position your own adviser has given you. Get your own tax, legal and accounting advice before relying on any assumption in a feasibility.

The contract of sale for the site, including any clause dealing with the GST treatment of the acquisition and anything agreed in writing between the parties about it.

Written confirmation from your accountant or registered tax adviser of the treatment assumed, the entity it applies to, and the date given.

A feasibility that separates the lines: gross realisation, selling and marketing costs, legals and GST, arriving at a stated net realisation figure rather than a blended one.

Sales evidence supporting the gross figure, whether settled comparables, an agent's appraisal or a valuer's opinion. A target price is not evidence.

The GST registration and activity statement position of the developing entity, and the ABN the project runs under.

A cashflow showing when GST is paid and credits expected, so the funding requirement across the program is visible rather than inferred.

A structure diagram: which entity acquires, which develops, which sells, and which borrows.

Any prior advice obtained, including advice you disagreed with. A disclosed complication is manageable; a discovered one usually is not.

Questions

The questions developers actually ask.

Does the margin scheme change how much I can borrow?

It can change the figure a facility is sized against. Where a lender tests against net realisation, the GST assumed on sales sits inside that calculation, so a different treatment produces a different net figure and may change the funded amount, the equity required, or both. The effect in your case depends on the lender, the structure and your adviser's confirmed position.

Can Siare tell me whether the margin scheme applies to my site?

No, and be cautious of any broker or lender who offers to. Eligibility turns on facts we are not qualified to assess or licensed to advise on. Ask your accountant or registered tax adviser. Our role starts once you have that answer: reflecting it accurately in the feasibility and evidencing it in the submission.

What happens if I simply assume it applies?

An experienced assessor usually notices an unsupported assumption and substitutes a more conservative one. The larger risk arrives later: an assumption that shifts after terms are issued changes net realisation, and that is generally a fresh credit decision rather than an amendment. Costly on a deal where time is the binding constraint.

Is a loan-to-value test measured against GRV or NRV?

Both are used, depending on the lender and the facility type. Many development facilities look to net realisation because gross overstates the funds available to repay at completion. Ask which basis applies before comparing proposals: two structures that look alike can be measured against entirely different denominators.

Does this still matter after practical completion?

Yes. When completed but unsold dwellings are refinanced onto a residual stock facility, net realisation is still the working number and GST still sits inside it. Scrutiny often sharpens, because the stock is real and the repayment source is the sale of the dwellings themselves. Our residual stock decision tool covers what tends to arise there.

Proof

Where the net number decided the outcome.

Completed transactions, on their own facts. They show how the work was approached, not what terms, pricing or timing are available on any other matter.

Residual stock

Mosman, NSW

A $12.6M residual stock facility on a trophy asset, argued directly with the lender's credit and client-partnerships teams rather than pushed through a processing queue. On that one past transaction the rate was argued down from 9.00% to 7.99%.

Read the Mosman case study →

Completion to sale

Altona North, VIC

A duplex delivered five months ahead of program through hands-on progress-claim management. One dwelling sold at auction, the other refinanced onto a residual stock facility: the two realisation paths a net figure has to contemplate from the outset.

Read the Altona North case study →

Mid-build cashflow

Newport, VIC

On that matter, $301,364 of cost-to-complete allowance was released mid-build after an evidence-based escalation, where the lender's default answer had been no. Funding timing, not only quantum, is what a cashflow has to survive.

Read the Newport case study →

Further completed matters sit in our track record, with related commentary in insights.

Next step

Bring us the position your adviser has confirmed.

Siare arranges and structures development and commercial property finance for business and investment purposes, with a principal who has sat on every side of the table: bank credit, private-credit funds, development and broking. If your accountant has given you a GST position and you want the feasibility built properly around it, that is the conversation to have.

As a La Trobe Financial Preferred Platinum Partner we have direct access to senior BDM and credit contacts when a structure needs to be discussed rather than submitted and hoped for.

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General information only, for business and investment purposes. Not tax, legal, accounting, credit or financial product advice, and it does not consider your objectives or circumstances. Not an offer of finance: nothing here suggests any particular facility, structure, pricing, amount or timeframe is available to you. Eligibility for and application of the GST margin scheme are matters for your own accountant or registered tax adviser. Case study figures relate to those completed transactions only.