Major Changes Affecting Sellers of New Residential Property
To withhold or not withhold – The new GST withholding regime in brief
On 1 April 2018 the Treasury Laws Amendment (2018 Measures No. 1) Act 2018 (Cth) commenced. The Act amended the Taxation Administration Act 1953 (Cth) and other federal legislation. If you are a property developer, an Agent or a purchaser of a new residential premises you need to be aware of your obligations under the legislation and the significance of 1 July 2018 in relation to sales of new residential premises.
The most significant change brought about by the legislation is a new regime for remitting GST to the Commissioner of Taxation. For contracts for the sale of new residential premises dated 1 July 2018 and onwards, the Buyer is required to withhold the applicable GST amount instead of paying it to the Seller. The Buyer is then required to pay the GST amount to the Commissioner of Taxation directly (rather than paying it to the Seller to remit to the Commissioner).
This new regime applies to a sale or long-term lease of certain new residential premises and certain ‘potential residential land that is included in a property subdivision plan’ (meaning it applies to new properties for which titles have already registered and also to ‘off-the-plan’ lots).
The Seller must give the Buyer, before making the taxable supply, a written notice stating certain things, failing which the Seller commits an offence. A Buyer may be liable to pay the Commissioner of Taxation a penalty equal to the amount that was to be withheld and paid to the Commissioner directly, if that Buyer fails in its obligation to withhold the GST amount and remit it as required.
Importantly, however, for contracts dated 30 June 2018 or earlier the new regime does not apply if the contract settles prior to 1 July 2020. Property developers in particular will need to consider whether they are required to issue notices to their buyers and ensure that buyers withhold GST and remit it to the Commissioner as required.
If you are a property developer, agent or a buyer or seller of new residential premises or you are unsure of your obligations under the new GST withholding regime, we encourage you to contact us for professional, tailored advice.