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  • GST at settlement

    From 1 July 2018, purchasers of new residential premises or potential residential land will be required to withhold an amount from the price for the supply and pay that amount to us on or before settlement.

    The property transactions impacted are taxable supplies (for example, sales and supplies by way of 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.

    Table 1: 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

    Note: When none of the circumstances in table 1 apply (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 of the amount the purchaser withheld and paid to us.

    The transfer of the legal title of the property following 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.

      Last modified: 15 May 2018QC 55431