What you need to know
The GST withholding obligations will apply when the consideration stated in a contract of sale is paid by the purchaser, to:
• the supply of all new residential premises (never been lived in)
• new residential subdivisions (vacant land)
• long-term leases (a period of 50 years or more)
If a purchaser is not registered for GST they must remit prior to or retain at settlement the GST on behalf of the vendor.
• The withholding obligation will continue to apply each time vacant residential land is supplied, rather than just the first supply. For example, the sale of vacant residential land by the first purchaser of that land prior to any building being constructed on the land.
• The amount of GST to be withheld is dependent on whether the sale is a plus GST transaction or a sale on the margin scheme. If the property is sold plus GST then the purchaser must remit 1/11th of the contract price to the ATO. If the property is sold applying the margin scheme, the purchaser must remit 7% of the contract price to the ATO.
• If the purchaser of the supply of property is registered for GST the new legislation will not apply.
The vendor must provide notice to the purchaser if the withholding obligations will apply, setting out details of the entity making the supply of property, when the purchaser is required to pay the Commissioner and the amount to be remitted.
A vendor, at the time of lodging its BAS statement, must provide the Commissioner with a report setting out the sale of the property and the amount of GST payable on the sale. A vendor may be entitled to a tax credit from the Commissioner for the GST already held and remitted by the purchaser.
The purchaser, being the recipient of the supply, must remit the GST to the Commissioner either prior to or at settlement. Payment of the GST by the purchaser will be dependent on the type of settlement occurring. If the settlement is to occur on PEXA, the GST will be paid directly to the ATO. If the supply does not settle via PEXA, then a purchaser may remit the GST via bank cheque to the ATO prior to or at settlement.
If the vendor fails to provide notice to the purchaser, the purchaser and/or its conveyancer may remit GST to the Commissioner without incurring any penalty.
The general rule in relation to the withholding obligations requires a purchaser to remit GST on the contract price on or after 1 July 2018 regardless of when the contract of sale was signed.
The exceptions to the general rule are:
1. If the contract of sale was entered into before 1 July 2018 with the consideration for the supply being paid by the purchaser before 1 July 2020, the withholding obligations will not apply.
2. If the contract of sale was entered into before 1 July 2018 with the consideration for the supply being provided by the purchaser after 1 July 2020, the withholding obligation will apply.