Legislation change: new home purchasers to pay GST directly to the ATO

Legislation change: new home purchasers to pay GST directly to the ATO

From 1 July 2018 the Federal Government’s purchaser GST withholding regime will come into affect.

These changes to GST laws will affect an obligation on purchasers of new residential premises or potential residential land to withhold an amount from the contract price - to be paid directly to the Australian Taxation Office.

Under the previous law, property vendors would remit the GST on their sales to the ATO by reporting it in their Business Activity Statements (BAS). Under the new regime, the responsibility for payment of the GST to the ATO will shift to the purchaser.

Who does it apply to?

The withholding regime will impact residential property developers and purchasers, as well as lawyers, conveyancers, financers and other parties who operate in the property development industry.

Application

The legislation excludes contracts entered into before 1 July 2018, provided the contract settled before 1 July 2020.

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How does it work?

Where a vendor makes a taxable supply of new residential premises or potential residential land, the purchaser or their representative will need to complete two online forms, after which the purchaser will then pay the GST withholding amount to the ATO: 

The amount of withholding will typically be 1/11 of the contract price, but situations where the amount to be withheld must be calculated differently are:

  • The margin scheme applies to the supply
  • The supply is between associates and is without consideration, or is for consideration that is less than the GST inclusive market value of the supply
  • There is a mixed supply, for example only partly a supply of new residential premises or potential residential land
  • There are multiple purchasers (not joint tenants)

Further information on the amount to be paid in the above situations can be found here. 

Contract price and adjustments

The withholding amount is calculated based on the contract price for the sale of the property. This does not include settlement adjustments but does include other contractual adjustments where, for example, the price may be modified during construction of a new residential premises.

For more information, Pitcher Partners provides an in-depth article on the regime here.