From 1 July 2018, purchasers of new residential premises or land will be required to withhold an amount from the price for the supply and pay that amount to the ATO on or before settlement.
The property transactions impacted are taxable supplies (for example, sales and supplies by way of a long-term lease) of new residential premises or taxable supplies of potential residential land where the contract is entered into before, on or after 1 July 2018.
To provide certainty to purchasers, a supplier (vendor, seller, etc) of residential premises or potential residential land must notify in writing whether a purchaser is required to withhold an amount. If the purchaser is required to withhold, the supplier must also notify the purchaser what that amount is and when it needs to be paid to us.
The general rule is that if the property sale contract specifies an amount that is the price of the supply (for example, the contract price) then the withholding amount is calculated on the contract price. However, there are some situations where the amount to be withheld must be calculated differently.
When the amount to be withheld must be calculated differently
| Situations, where the amount to be withheld, must be calculated differently | Amount to be paid by the purchaser |
| The margin scheme applies to the supply | 7% of the contract price or price |
| The supply is between associates and is without consideration, or is for consideration that is less than the GST inclusive market value of the supply | 10% of the GST exclusive market value of the supply |
| There is a mixed supply, for example only partly a supply of new residential premises or potential residential land | A reduced amount using a reasonable apportionment of the contract price or price multiplied by the applicable rate. |
| There are multiple purchasers (not joint tenants) | 7% (margin scheme) or 1/11th of the contract price or price for their % interest in the property purchased |
NB:
When none of the circumstances in the above table applies (that is, the general rule) then 1/11th of the contract price or price is the amount to be paid by the purchaser.
This law change does not affect the supplier’s obligation to lodge their Business activity statement (BAS) and report their GST liabilities or entitlements on taxable supplies of these types of properties.
Once the supplier lodges their BAS and it is processed, the supplier will receive a credit for the amount the purchaser withheld and paid to the ATO.
The transfer of the legal title of the property following the settlement of a sale is a matter for the parties to the sale contract. The changes do not require the withholding amount to be paid to us before a title transfer can be registered with the relevant State or Territory agency.
Purchasers do not need to register for GST just because they have a withholding requirement.
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