As promised in the 2017-2018 budget, the government is introducing new GST withholding legislation for new residential premises, new residential subdivisions, and long term leases. The new obligations commence on 1 July 2018, and will have a serious impact on the sector.
On 1 July 2018, a new regime of GST withholding obligations comes into effect and is set to create considerable change in the industry.
In brief
As promised in the 2017- 2018 budget, the Government is introducing new GST withholding legislation for supply of real property, specifically new residential premises, new residential subdivisions and long term leases (a period of 50 years or more). The GST withholding obligations commence on 1 July 2018 and will seriously impact the sector.
What you need to know
Vendor obligations
The vendor must provide notice to the purchaser whether or not the withholding obligations will apply, setting out details of the entity making the supply, when the purchaser is required to pay the Commissioner and the amount to be remitted.
A vendor, at the time of lodging its BAS statement, must provide the Commissioner with a report setting out the sale of the property and the amount of GST payable on the sale. A vendor may be entitled to a tax credit from the Commissioner for the GST already held and remitted by the purchaser.
Purchaser obligations
The purchaser, being the recipient of the supply, must remit the GST to the Commissioner either prior to or at settlement. Payment of the GST by the purchaser will be dependent on the type of settlement occurring. If the settlement is to occur on PEXA, the GST will be paid directly to the ATO. If the supply does not settle via PEXA, then a purchaser may remit the GST via bank cheque to the ATO prior to or at settlement.
If the vendor fails to provide notice to the purchaser, the purchaser and/or its conveyancer may remit GST to the Commissioner without incurring any penalty.
Transition period
The general rule in relation to the withholding obligations requires a purchaser to remit GST on the contract price on or after 1 July 2018 regardless of when the contract of sale was signed. The exceptions to the general rule are:
Conclusion
Madgwicks is currently reviewing all relevant or affected contracts or sale and implementing the necessary amendments. As 1 July 2018 is fast approaching, please contact the Madgwicks Property team to discuss your obligations for your existing and future developments.
Read more about the changes to Australia's GST withholding obligations:
Housing measures in the 2017 Budget
Vendors and purchasers of land becoming unpaid tax collectors
Older apartments may become less valuable if budget depreciation changes get up