GST & Properties – new changes for the purchaser
If you are thinking of buying a newly established residential property, or a subdivided property, you may need to remit GST on the purchase directly to the ATO. The following article provides a quick guide to this new legislation, and what to do if you are affected.
What has changed?
The Bill was passed and received Royal Assent on 29 March 2018 that requires purchasers of new residential premises or new subdivisions to withhold GST from the purchase price and pay it directly to the ATO.
Why was this change necessary?
This measure is brought out as a result of the ATO noticing an increasing amount of property development businesses attempting to avoid remitting payment of GST from sale of properties to the ATO.
Who is affected?
Purchasers who purchase new residential premises or potential residential land from a property development business. This could include purchasing a house & land package from a developer.
When will it take effect?
The new legislation applies to contracts signed after 1 July 2018 as long as the property transaction settles before 1 July 2020.
How do purchasers calculate and remit payment to the ATO, and when?
It is understood that the GST amount is only applicable to the contract price. The exact GST percentage will be dependent on whether margin scheme applies or not.
The conveyancers who acts on behalf of the purchaser will be expected to calculate the amount and arrange a remittance of the GST amount to the ATO, either via their online conveyancing portal or providing a bank cheque to be provided to the seller. The GST amount is to be paid to the ATO, either by conveyancing agent, or the seller (if a bank cheque is provided), on or before the settlement date.
It is now the purchaser’s responsibility to ensure the GST is paid to the ATO, or a bank cheque payable to the ATO is provided to the seller at settlement. Failure to do so may result in the purchaser paying double the GST amount!
Feel free to contact us if you have further questions with regards to this and we are more than happy to help.
