The purchaser GST withholding regime for supplies of new residential property has been enacted by the Commonwealth Government. The changes will come into effect on 1 July 2018.
The new regime will impact:
- new residential property transactions as it requires purchasers of new residential premises and potential residential land to remit the GST payable on the supply directly to the Australian Taxation Office (ATO); and
- residential property developers and purchasers, together with lawyers, conveyancers, financial institutions and other parties in the property development industry.
Currently a seller of residential property that is subject to GST is required to remit the GST on a sale to the ATO by reporting it in their Business Activity Statements (BAS). The concern for the Government is that some property developers fail to remit the GST on their sales, while still claiming the GST input tax credits for development costs.
The new legislation will shift the responsibility for payment of the GST to the purchaser. This is to ensure that the ATO receives the GST at settlement to reduce the risk of missing out on collecting the GST in situations where the developer goes into liquidation after it receives payment for the property but before the GST is remitted to the ATO.
The new rules apply to supplies:
- by way of sale or long-term lease, of new residential premises; and
- potential residential land that is included in a subdivision plan that does not contain any residential buildings.
All contracts of sale entered into on or after 1 July 2018 will be required to comply with the new rules.
The new "GST withholding" regime to commence from 1 July 2018 is on its way, and promises to have a significant impact on "new" residential property transactions.
The above information is general information from Cormiston Legal and you can contact us on 03 6332 9353 or use our contact us form at - https://www.cormistonlegal.com.au/contact-us if you require assistance.