Commencing on 1st July 2018, GST withholding obligations will be shifted from the developer to the purchaser of affected properties. The new laws only affect contracts which settle on and after 1st July 2018 and according to the REINSW the transitional provisions exempt contracts for sale entered into before 1st July 2018 provided that the purchase price is paid before 1st July 2020.
If the contract for sale is entered into before 1st July 2018 but the purchase price is paid after 1st July 2020, then the withholding obligations will apply.
Developers will be required to provide purchasers of written notification if and when a purchase is required to withhold an amount for GST.
The properties affected are:
- Brand new residential properties
- New subdivisions for residential property purposes i.e. vacant land
- Long-term leases having a term of 50 years or more
The new GST provisions do NOT apply to existing residential premises or any commercial properties (whether new or existing).
The GST is collected at the point of settlement during your conveyance and the onus is on the purchaser to pay the GST amount directly to ATO. In other words, the GST amount is withheld from the purchase price which used to be remitted to the developer. The purchaser need not be registered for GST to make this direct payment. Put in simple terms, generally, one extra settlement cheque will be required on settlement being the GST remittance to the ATO (which is deducted from the purchase price payable to the developer who supplied the new residential premise/residential land subdivision).
If settlement occurs via PEXA, GST is automatically remitted directly to the ATO.
Vendors/developers will at the time of lodging their BAS, provide the ATO with details of the sale of the property and the GST applicable for the supply. The Vendor/developer may be entitled to a tax credit for the GST component remitted by purchaser.
Readers should note that this article is provided for personal information purposes only and that it is not a substitute for professional legal advice nor is it to be relied upon as such. Please seek your own legal advice for your specific facts and circumstances.