From 1 July 2018 the ATO has introduced a new regulation which will impact people who purchase new residential properties. This measure is aimed at ensuring that the ATO receives the GST that is owed on the sale of such properties. It is important to note that this measure only applies to new residential properties – not existing houses or commercial properties. It is also important to note that the onus is on the vendor to inform the purchaser of the need to withhold GST at settlement.
The requirement under the system is for the purchaser, once informed by the vendor, to withhold the appropriate advised GST from the final settlement proceeds and pay this directly to the ATO. The GST exclusive price is still paid to the vendor. The vendor then declares this in their BAS. There is no need for the purchaser to register for GST and they do not need to lodge any BAS. The system has been introduced to ensure developers do not avoid their GST reporting obligations or bankrupt themselves before paying the ATO.
Hopefully this is something that the purchaser’s lawyer and conveyancer will be aware of but they are not able to provide tax or GST advice so if you are unsure of your obligations it is advised purchasers contact their tax advisor.
If you are a potential property purchaser or property developer and need assistance, please do not hesitate to contact us.