Changes to the way GST is paid for Property Settlements
The ATO changed the way it collets Goods and Services Tax (GST) on some property transactions from 1st of July 2018.
From 1st of July, some purchasers of new residential premises or potential residential land will need to withhold an amount from the purchase price and pay it directly to the ATO. Vendor will receive a credit for this amount when vendor lodges their Business Activity Statement (BAS) for the tax period.
GST on settlement was announced in the 2017/18 Federal Budget
There is NO change to the rate of GST, the change is to the way the ATO collects the GST. How it works,
- Purchasers will now pay an amount on account of the GST directly to the ATO instead of paying it to the vendor as part of the purchase price
- Vendor of residential premises or potential residential land must notify purchasers whether they,
- Are required to withhold an amount from the purchase price and pay it to the ATO
- Are not required to withhold e.g. as the supply is not taxable or an exclusion applies
- This notice can be in the standard land contract OR given as a separate document
If purchaser does have a withholding obligation, the vendor’s notice must include the supplier’s name and Australian Business Number (ABN), the amount to be paid and when it must be paid to the ATO. However, if a purchaser has a withholding obligation they must lodge following forms with the ATO.
- GST property settlement withholding notification form: lodged after the contract has been entered into and before settlement
- GST property settlement date confirmation form: Lodge on settlement
These forms are typically will be submitted by the conveyancer or solicitor
Version: UpHill News Letter 1-14 September 2018
Please consult your solicitor or conveyancer to obtain in-depth information on changes to GST payments. Source: REIV News issue 81