GST on Sale of Property

About

Effective of 1 July 2018, the Australian Taxation Office is implementing a new way to collect GST from the sale of property. When a buyer enters into a contract for new residential land or buildings after 1 July 2018 they are required to withhold an amount from the purchase price and pay directly to the ATO on or before settlement. The vendor therefore will receive less than 100% of the settlement proceeds through this new process. The GST paid to the ATO will serve as a credit and this will be applied against the vendor’s business activity statement when it is lodged.

Amount required to be paid to ATO

The amounts required to be paid differ depending on circumstances. These are outlined in the table below:

• Margin Scheme Applies – 7% of contract price or price
• Supply is between associates and no consideration or less than GST-inclusive market value of supply – 10% of the GST exclusive market value of supply
• Mixed supply (e.g. partly supply of new residential premises or potential residential land) – Reduced amount using appropriate apportionment of contract price
• Multiple purchasers – 7% if using margin scheme or 1/11th of contract price or price for their % interest in property purchased
  

  Details vendor provides buyer

• Vendors name and Australian Business Number
• The amount buyer needs to withhold and pay to the ATO
• When the buyer needs to make the payment
• If there is a non-cash payment included in the purchase, the GST-inclusive market value of the non-cash payment
• Other information as stated in regulations
  

  Summary

• Responsibility of remittance of GST falls on the purchaser
• GST remitted to ATO is offset when the Activity Statement of the developer (vendor) is lodged
• Amount of GST which is to be remitted by purchaser depends on specific circumstances (see table)
• Pre-30 June contracts are not affected by this change, even if settlement is post 30 June 2018
• Penalties will apply to non-compliance of the new withholding rules