Tax Laws have changed from 1 July 2018.
What is the new Tax Law?
Purchasers of new residential properties, where the vendor is registered for GST, are required to pay a portion of the purchase price directly to the Australian Tax Office (ATO) on or before settlement of the purchase.
How much GST is payable?
The purchaser will be required to withhold 1/11 of the purchase price.
Who is the GST paid to?
The amount is to be paid directly to the ATO.
How does a purchaser know about this requirement?
It is the vendor’s obligation to notify the purchaser if an amount of GST is required to be paid to the ATO.
The vendor must provide the following particulars to the purchaser:
– Amount of GST to be withheld;
– When the GST must be paid to the ATO; and
– Any other particulars, including the supplier’s name and ABN.
What is the process?
The purchaser is required to lodge a GST property settlement withholding form.
The ATO will issue confirmation of receipt of the form with a unique payment reference number (PRN) and a lodgement reference number (LRN).
Just prior to settlement, or on settlement, the purchaser is required to lodge the GST property settlement date confirmation form.
Payment is then made to the ATO using the PRN provided by the ATO.
The ATO will notify the vendor when the GST payment has been received. The payment will then be applied as a credit to the vendor’s next BAS.
When is the payment due?
The GST liability does not occur until settlement of the property. This is when the balance of the purchase price, and the deposit, is released to the vendor.
What if a contract was entered into prior to 1 July 2018?
In the transitional rules, any contract entered into before 1 July 2018 and settlement takes place before 1 July 2020, no GST will be required to be withheld.
If you are considering buying a new residential property and require further advice regarding payment of GST please contact us.