From 1 July 2018, purchasers of new residential premises or subdivision of potential residential land are required to withhold GST from the contract price and remit this directly to the ATO on or before settlement. The amount withheld will be 1/11th of the contract price or 7% where the margin scheme applies.
Changes to the law are largely as a result of some developers, who are making taxable sales from new residential premises or subdivision of potential residential land, failing to remit the GST collected from purchasers to the ATO.
The amended legislation will take effect from 1 July 2018 and will include a transitional arrangement that exclude sale contracts entered into before 1 July 2018 as long as the property transaction settles before 1 July 2020. This will provide certainty for sale contracts that have already been signed.
It should be noted that responsibility will be placed on the seller to advise the purchasers in writing whether or not the property is a new residential property. If no notice is provided, penalties may apply for both the buyer (equal to the amount that should have been withheld) and the seller (up to $21,000 for individuals and $105,000 for companies).
The contents of the seller’s notice should include:
> Whether the recipient has to withhold
> Suppliers name and ABN
> The amount required to be withheld
> When the amount has to be paid
> If part of the price is non-monetary (its market value).
With respect to lodgement of the BAS, the seller will report the sale and GST components as normal. However, as the GST has already been remitted to the ATO on settlement (using a special payment reference number generated by the ATO), a GST Withholding Credit will be applied on the BAS, leaving only the net amount payable/refundable on lodgement.