From 1 July 2018, purchasers of new residential premises or subdivision of potential residential land will be required to withhold an amount from the contract price, and pay that amount to the ATO on or before settlement.
The amount a purchaser must withhold and remit to the ATO is:
• 1/11th of the contract price (for fully taxable supplies)
• 7% of the contract price (for margin scheme supplies)
• 10% of GST exclusive market value of the supply (for supplies between associates for a price less than GST inclusive market value).
A supplier must provide a notice in writing to the purchaser before selling any residential premises or potential residential land stating whether the purchaser needs to withhold or not. The supplier's notice may either be in the contract for sale, or in a separate document. A failure by the supplier to provide the notice doesn't affect the purchaser's obligation to withhold an amount if the property is a taxable sale of new residential premises or potential residential land.
The amendment is aimed as property developers who fail to remit GST to the ATO despite claiming input tax credits. However it will require all mum and dad buyers who are not carrying on a business and who have no knowledge of the GST system to withhold and remit GST.
Purchasers or their representatives must lodge two online forms to advise the ATO of their purchase:
• The GST property settlement withholding notification form is used to advise the ATO that a contract has been entered into for new residential premises or potential residential land that requires a withholding amount. This form can be submitted any time after a contract has been entered into and prior to the settlement date.
• The GST property settlement date confirmation form is used to confirm the settlement date and can be submitted at the time of settlement and when the payment has been made to the ATO.
Further information is available at https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Property/GST-property-settlement-online-forms-and-instructions/