Changes Effective 1 July 2018
If you’re in the market to purchase a new residential property or are looking to buy a block of land for future development, as a purchaser you are required to withhold GST on settlement and this amount is to be directly paid to the ATO.
Before the current financial year began, this was purely the responsibility of the seller. Apart from purchasing residential property, this legislation also applies to long-term lease.
Important points to remember:
- It is mandatory for the seller to provide the buyer with a written notice if GST is applicable to the transaction and to be withheld. There are two ways of doing this- information can be added into the sales contract or in a separate notice to the buyer. It should include the seller’s ABN, GST amount and the due date of making the payment. Penalties apply in the absence of such a notice.
- This legislation does not alter the price of the property. It simply asks buyers to pay GST amount to the ATO and the remaining amount to the seller.
- The amount of GST that will be withheld is often:
- 1/11th of the price mentioned on the contract
- If margin scheme applies, 7% of the contract price
- 10% of GST exclusive market value of the supply if not at arm’s length
- There are two compulsory forms that buyers need to fill out:
- Form one “GST Property settlement withholding notification”- which is completed and lodged at any time after honoring the contract up till the settlement date
- Form two “GST Property settlement date confirmation” to be completed and lodged upon settlement
- GST amount is to be paid to the ATO after lodgement of form two.
- Commercial or commercial residential premises are exempted from this new changes.
For more information on such vital matters, please do not hesitate to get in touch with one of our friendly team members.