Non-Compliance Fuelling Changes to How GST is Applied to Certain Property Transactions

December 2017

Treasury releases draft legislation regarding how GST is collected on certain property transactions. 

In the 2017-18 Federal Budget the Government announced that changes would be made to the way that GST liabilities are collected on certain property transactions from 1 July 2018. Treasury has now released exposure draft legislation relating to the proposed changes, which provide further detail on how the new rules might operate. 

GST to be Remitted on  Sale of Property

When an entity makes a taxable supply of new residential premises or vacant land that entity needs to remit the appropriate GST amount to the ATO on its next activity statement. However, the Government is concerned about the level of noncompliance in the property industry, especially as some developers wind up their business before the relevant BAS lodgement to avoid paying the GST amount to the ATO.

Under the new rules, the purchaser would be responsible for paying 1/11th of the purchase price to the ATO when acquiring new residential premises or new subdivisions of potential residential land. The purchaser would often need to pay this amount to the ATO on or before settlement occurs. The developer would then be entitled to a credit for the GST amount that has been paid to the ATO under these provisions. If the developer is able to apply the margin scheme to the transaction then they would generally receive a refund from the ATO of the excess GST amount that has been paid.

One of the other features of the proposed new rules is that the developer will be responsible for notifying the purchaser of the application of the provisions and the requirement to withhold some of the purchase price and pay it to the ATO.

Penalties will apply if the notification is not provided by the applicable deadline.

Speak to Your Advisors

As with the relatively new CGT foreign resident withholding rules, this measure makes the purchaser responsible for paying certain amounts to the ATO at the time the transaction occurs.

For more information about your requirements from a tax perspective, speak to our team on 02 9957 4033.

Please note, we are closed for the Christmas & New Year break and will be back in the office from 9 January 2017.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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