Provisions of the Taxation Administration Act 1953 in regard to the payment of GST on the purchase of certain real property came into force on 1 July 2018 and apply to all transactions that settle after that date. Essentially, Purchasers are required to withhold the GST and remit it to the ATO on the purchase of new residential premises or potential residential land. The amount to be withheld is:
1/11th of the purchase price if the price is to be quoted as GST inclusive;
10% if the price is to be quoted as GST exclusive; or
7% if the margin scheme applies (regardless of what your actual margin scheme calculation or obligation might be).
Where a withholding obligation exists, the Purchaser must withhold the relevant amount at settlement and pay it to the ATO without delay. The Purchaser is required to complete a GST property settlement withholding notification form prior to settlement at which time the Purchaser will receive a payment reference number, and a payment slip allowing payment to be made.
GST MUST be withheld if:
The Vendor is registered for GST or ought properly to be registered for GST; and
The property includes new residential premises (which can include substantially renovated residential premises) or potential residential land that has been created by a recent subdivision.
GST is NOT required to be withheld if:
The Vendor is not registered for GST and is not required to be registered for GST for the purposes of this transaction;
The premises are not new;
The Purchaser is registered for GST and acquires the property for a creditable purpose;
The land includes a building used for commercial purposes.
The Vendor must notify the Purchaser whether or not the Purchaser is required to withhold an amount on settlement. The penalty for a Vendor failing to give notice is a fine of $21,000. An administrative penalty may also be imposed. The penalty for failing to withhold is an administrative penalty equal to the amount that was required to be withheld.
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