New GST obligations for property purchasers

June 2018

New guidance from the Tax Commissioner regarding new GST obligations on new residential bids and newly subdivided residential land.

Following the passage of legislation introducing new obligations on purchasers of certain types of property to pay GST to the ATO the Commissioner has issued a draft Law Companion Ruling which provides guidance on how to manage compliance with the new rules.

In broad terms, from 1 July 2018 purchases of new residential premises or newly subdivided residential lots will be required to pay the GST amount directly to the ATO rather than to the vendor.

The ruling confirms that purchasers must pay the GST amount to the ATO on or before the day on which any of the consideration is first provided for the taxable supply. However, the ATO confirms that this does not include payment of a genuine deposit.

Vendors of residential premises or potential residential land must give a written notice to the purchaser before making the supply, stating whether the purchaser is required to make a payment of GST to the ATO in relation to the supply.

When it comes to determining the amount that needs to be paid to the ATO this will generally be 1/11th of the contract price. However, if the margin scheme applies to the sale the purchaser needs to pay 7% of the contract price instead. If the parties involved in the transaction are associates, then the purchaser will generally need to pay 10% of the GST-exclusive market value of the property.

To understand how this impacts you, please contact us on 02 9957 4033

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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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