New GST withholding rules for taxpayers buying from property developers

Jun 28, 2018
minute read

Will the new GST withholding rules affect you?

New GST withholding rules mean those who purchase certain types of properties and land will be responsible for withholding and paying GST on behalf of the property developer.

Why has the ATO made this change?

There has been a growing number of businesses in the property development industry failing to remit GST following the sale of new residential premises and new sub-divisions.

When does it apply?

1 July 2018 – there is a two year transitional period for contracts entered into before 1 July 2018 and consideration first provided before 1 July 2020.

What does this mean for me?

If you purchase a new residential premise or new sub-division you may be required to withhold GST from the purchase price to pay it directly to the ATO as part of the settlement process.

What type of properties are affected?

Sale or a long-term lease (50 years or more) of certain *new residential premises or **potential residential land.

*New residential premises –

  • Properties not previously sold as residential premises and have not previously been subject to a long-term lease.
  • Created through substantial renovations.
  • Built to replace demolished premises on the same land.
  • Not commercial residential premises (eg hotel/motel).

**Potential residential land –

  • Land that is included in a property subdivision plan (eg registered strata title plans and plans to subdivide land).
  • Land that does not include any building that is in use for a commercial purpose.
  • Land that has been zoned for use for residential premises under a law of state/territory but does not contain any residential premises.

What amount of tax will be withheld?

A proportion of the contract price excluding normal settlement adjustments (council rates and land tax etc) will be withheld, the exact proportion will depend on individual circumstance, please speak to your tax adviser if these new rules will apply to you.

Chat to us if you need to discuss the new GST withholding rules, we’re happy to answer your questions.

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