GST at settlement

If you are selling or buying new residential premises or potential residential land, you may need to pay GST at settlement. The way GST is paid for certain property transactions affects purchasers, suppliers and their representatives.

From 1 July 2018, at settlement most purchasers pay both:

• the withheld amount of GST direct to us
• the balance of the sale price of the property, minus the withholding amount, to the supplier.

This applies to both:

• new residential premises
• land that could be used to build new residential property – potential residential land.

Watch  

Find out about  

• If you are selling property
• If you are purchasing property
• Withholding obligation
• Properties that are included and excluded
• GST at settlement process
• How to amend or cancel your forms
• How to submit a missing credit or transfer request
• How to apply for a refund
• Margin scheme
• Multiple supplies in one contract
• Compliance and penalties
• Transitional arrangements ended 30 June 2020
• Foreign resident capital gain withholding and GST at settlement
• History
• Terms we use
• Resources

See also  

• GST property settlement online forms and instructions
• GST at settlement – a guide for purchasers and their representatives
• GST at settlement – a guide for suppliers and their representatives

If you are selling property

If you're selling residential premises or potential residential land you must:

• notify the purchaser in writing (supplier notification)
• advise whether they need to pay a withholding amount from the contract price for the property or not
• state the withholding amount.

This can be included in the sales contract or in a separate document prior to settlement. Most states have updated their standard contracts to include this information.

If you have made a mistake on the notification, you must provide the purchaser with an amended one.

You may incur penalties if you fail to provide the required notice.

The purchaser pays the withholding amount directly to us at the time of settlement – instead of to you.

Reporting obligations

The standard elements of selling a property and reporting the GST on your sales apply.

On your business activity statement (BAS) you must report:

• all property sales at label G1
• GST on sales at label 1A – see Step 8 Supplier lodges business activity statement.

You receive a credit in your GST property credits account. This is the withheld amount paid by the purchaser. If there are multiple suppliers in the property transaction, it is your portion of the withheld amount.

This credit is transferred from the GST property credits account into your activity statement account when you lodge your activity statement for the relevant period.

If you're unsure of the correct GST treatment of the supply, we recommend you seek advice from us or your tax professional.

Conveyancers and real estate agents can assist purchasers to complete the forms. However, they can't provide GST advice unless they're registered tax or BAS agents.

For more information see GST at settlement – a guide for suppliers and their representatives.

Return to GST at settlement.

If you are purchasing property

If you're purchasing a property, ensure you have a written notification advising whether or not you have a withholding obligation on the property.

Withholding obligation

If you have a withholding obligation, you must:

• have a written notification from the supplier stating if the sale is subject to GST
• lodge Form one: GST property settlement withholding notification
• lodge Form two: GST property settlement date confirmation
• pay the withheld amount to us (to the nearest dollar).

You don't need to register for GST just because you have a withholding obligation.

If you're unsure or need further advice about the information in the supplier's notification, ask us or your tax professional.

You may incur penalties if you fail to lodge the forms and make the payment to us.

We won’t impose penalties when it's reasonable for you to rely on a notification from a supplier. However, if you know a supplier is registered for GST and they’re selling new residential premises not previously sold, it's unreasonable not to withhold and pay an amount to us at settlement.

Using a representative

If you authorise a representative to lodge the forms on your behalf, you're required to provide a signed declaration.

Note: Conveyancers can't provide GST advice unless they're a registered tax or BAS agent.

If you're acting as the representative for the purchaser, you must understand your obligations under the Tax Agent Services Act 2009 (TASA).

See also  

• GST at settlement – a guide for purchasers and their representatives
• GST property settlement online forms and instructions
• Property and registering for GST
• Conveyancers and GST withholding for certain taxable supplies of propertyExternal Link

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Properties that are included and excluded

You need to determine if GST at settlement applies when selling or purchasing property.

Included property transactions

Withholding may apply if you purchase or sell:

• new residential premises  
  • house and land
  • off-the-plan
  • display homes
  • new apartments
   
• potential residential land  
  • property subdivision plan
  • land that could be used to build new residential premises.
   

Excluded property transactions

Some property transactions are excluded from the withholding obligation. Withholding doesn't apply to:

• new residential premises created through substantial renovations
• commercial residential premises (for example, hotels, boarding houses, caravan parks)
• commercial property
• residential premises that are no longer new because they were sold previously (or subject to a long-term lease) or have been continuously and solely rented for more than five years
• potential residential land supplied to a GST registered business that acquired it for a creditable purpose – for example, to develop the land, construct and sell new residential premises)
• potential residential land containing a building in use for commercial purposes – for example, a factory or shop operated where local zoning permits mixed use.

If you're selling a family home, you may also be excluded from the withholding obligation.

Find out about a Registered entity acquiring land for a creditable purpose.

Return to GST at settlement.

GST at settlement process

Watch our video for a quick overview about how the GST at settlement process works when buying or selling new residential property.

Watch:

For contracts entered into from 1 July 2018, follow these steps:

• Step 1: Supplier must notify purchaser
• Step 2: Purchaser or representative lodges Form one
• Step 3: Form one email confirmation
• Step 4: Purchaser or representative lodges Form two
• Step 5: Purchaser makes the payment
• Step 6: Payment email confirmation
• Step 7: Supplier credit and email confirmation
• Step 8: Supplier lodges business activity statement

Step 1: Supplier must notify purchaser

The supplier is the entity required to report the property transaction to us on their activity statement.

When the contract between the supplier and purchaser is signed, the supplier must notify the purchaser in writing (supplier notification) before settlement of the property. This is whether or not they have a withholding obligation.

The notification can be included in the sales contract or in a separate document provided before settlement. All law societies (except for Northern Territory) have revised standard land contracts to include the notification.

If the purchaser doesn't have a withholding obligation, your notice must be clear that no withholding is required.

If the purchaser has a withholding obligation, your notice must include:

• the name and ABN of all suppliers
• GST branch number (if applicable)
• the amount they must withhold (round down to the nearest dollar)
• when they must pay it to us
• GST-inclusive contract price (plus the GST inclusive market value of non-monetary consideration).

For more information see Supplier notification.

Step 2: Purchaser or representative lodges Form one

The purchaser is required to lodge Form one: GST property settlement withholding notification online to us once the contract has been entered into up until the due date for payment of the withholding amount.

The purchaser can authorise a representative to lodge one or both forms on their behalf by providing the representative with a signed declaration. The purchaser's representative can include either a conveyancer or solicitor.

The purchaser includes the information from the supplier’s notice, their details and the expected settlement date. Some information may not be available until closer to settlement (for example, address information for off-the-plan sales).

When the form has been successfully lodged, an online confirmation screen will appear with a payment reference number (PRN) and lodgment reference number (LRN). You can print this page.

A separate payment advice PDF can be printed and kept for your records.

You need to keep the PRN and LRN numbers for when you

• lodge Form two: GST property settlement date confirmation
• make your payment.

For more information see GST property settlement online forms and instructions.

Step 3: Form one email confirmation

If the purchaser elected to receive emails on Form one, an email is sent to confirm the form has been processed by us. This includes a summary of the key information and an attached payment advice pdf. The purchaser should keep a copy of this email.

It may take 24 to 48 hours before you receive the confirmation email.

Step 4: Purchaser or representative lodges Form two

The contract type determines when you need to lodge Form two: GST property settlement date confirmation and make the payment to us.

Standard land contract

Under a standard land contract, you must quote the LRN and PRN you received when Form one was lodged when you lodge Form two: GST property settlement date confirmation.

You must lodge Form two online either:

• within two business days before settlement
• on the day of settlement
• on the next business day after settlement.

The confirmation screen confirms the form was successfully lodged. This records the purchaser’s withholding liability on their account on the settlement date. You can print the confirmation screen and keep it with your records.

For more information see GST property settlement online forms and instructions.

Instalment contract

Under an instalment contract:

• the timing of the obligation to pay the withholding amount is different to a standard land contract.
• you pay the withholding amount on or before the date the first payment is made (other than a genuine deposit).
• you must quote the LRN and PRN received when Form one was lodged when you lodge Form two: GST property settlement date confirmation.

You must lodge Form two online either:

• within two business days before the first instalment
• on the day of the first instalment
• on the next business day after the first instalment.

The confirmation screen confirms the form has been successfully lodged. This records the purchaser’s withholding liability on their account on the date the first instalment is made. You can print the confirmation screen and keep it with your records.

For more information see GST property settlement online forms and instructions.

Step 5: Purchaser makes the payment

Once Form two: GST property settlement date confirmation is lodged, you must:

• pay the withholding amount (rounded down to the nearest dollar) when settlement occurs
• quote the PRN you received when Form one was lodged.

For more information see How to pay the withholding amount.

Step 6: Payment email confirmation

If the purchaser elected to receive emails on Form two, we will send you an email when Form two and your payment have been processed.

It may take 24 to 48 hours before you receive the confirmation email.

Step 7: Supplier credit and email confirmation

The credit for the amount withheld is allocated to the supplier’s GST property credits withholding account. If there are multiple suppliers in the property transaction, the credit is the equivalent proportion of the withheld amount.

The supplier (or agent) receives an email confirmation to the email address on the supplier's activity statement account. This includes identifiers for the property transaction and confirms we received the credit.

A supplier can view their GST property credits account online through either:

• Online services for individuals and sole traders (you will need a myGov account linked to the ATO)
• Online services for business
• Online services for agents

See also  

• GST at settlement – a guide for suppliers and their representatives

Step 8: Supplier lodges business activity statement

The supplier must report on their activity statement:

• all property sales at label G1
• the GST on sales at label 1A.

The property sale must be reported in the reporting period that settlement occurred. For example, if the property settled on 5 December, report the property transaction in the December activity statement.

Note: Only report the GST on the sale at label 1A, not the withholding amount paid by the purchaser.

The withholding amount paid by the purchaser is allocated as a credit to the supplier's GST property credits account.

The credit on the supplier's GST property credits account is transferred into the supplier's activity statement account when they lodge the relevant activity statement.

It may take up to two business days before the credit is transferred from the GST property credits account into the activity statement account.

See also  

• GST at settlement – a guide for suppliers and their representatives
• Completing your BAS for GST

Examples of withholding at settlement

 

See also  

• GST at settlement – a guide for suppliers and their representatives
• Completing your BAS for GST

Return to GST at settlement.

How to amend or cancel your forms

All parties should view Form one: GST property settlement withholding notification before settlement to ensure there are no changes required to the form.

If changes are identified or if the contract doesn't settle, refer to How to amend or cancel your forms.

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How to submit a missing credit or transfer request

If a credit isn't showing on the GST property credit account within two weeks after settlement, you may need to submit a missing credit request.

If the credit hasn’t transferred from the GST property credit account into the activity statement account or the credit has been allocated to an incorrect supplier, you may need to submit a transfer request.

See also  

• How to submit a missing credit or transfer request
• GST at settlement – a guide for suppliers and their representatives

Return to GST at settlement.

How to apply for a refund

If you're a supplier you can apply for a refund if your purchaser has paid us an amount they withheld in error.

If you're a purchaser you can apply for a refund if you made a payment to us in error – for example, made the same payment twice.

To request a refund, provide us with the following:

• details identifying the purchaser and contact details
• lodgment reference number (LRN) of the Form one: GST property settlement withholding notification
• payment reference number (PRN)
• details identifying the supplier, including ABN and contact details
• details identifying the authorised person lodging the form and contact details.

Provide supporting documentation as evidence the requested refund amount was withheld from the supplier and paid to us in error (for example, a sales contract showing contract price, the settlement statement and receipts).

For suppliers, the refund request must be in writing and lodged a minimum of 14 days before you must pay GST on the supply (in your activity statement).

Completed refund requests and supporting documents should be sent to:

Australian Taxation Office
Locked Bag 1127
ALBURY  NSW  2640

Return to GST at settlement.

Margin scheme

The margin scheme enables GST to be calculated on a concessional basis. Rules depend on when a property was first purchased.

You can only apply the margin scheme if the sale of a property is taxable.

Generally, the GST is based on the difference between:

• the price the you paid for the property when you first purchased it, and
• the subsequent sale price of the property.

There must be a written agreement to say the sale of the property is using the margin scheme before the settlement date.

If you purchase a property where the margin scheme is applied to the sale, you can't claim a GST credit for the GST included in the price.

If you charged the full rate of GST when purchasing a property as part of your business, generally you can claim the GST back. However, you can’t apply the margin scheme on subsequent sales.

See also  

• Eligibility to use the margin scheme
• Methods to calculate the margin

Rebates and adjustments

Rebates are a type of discount, or a reduction in price that's not a normal settlement adjustment. Examples include variations to the finish of an apartment that applies before completion and discounts following a building report that are negotiated and applied before completion.

These types of adjustments are included when calculating the GST withholding amount.

When an adjustment or rebate is applied before settlement, the contract price should be reduced and the GST withholding amount calculated on the adjusted price.

See also  

• LCR 2018/4 Purchaser's obligation to pay an amount for GST on taxable supplies of certain real property

Multiple supplies in one contract

There are contracts that include multiple supplies (for example, new residential premises and commercial premises) of different kinds. This is where each supply hasn't been allocated a portion of the total contract price.

In this situation, suppliers need to determine a reasonable apportionment of the contract price that applies to the withholding obligation.

If it's not practical to apportion the price, the withholding amount should be based on the total price for the supply.

See also  

• Long term leases
• If acquisitions are for a creditable purpose

Return to GST at settlement.

Compliance and penalties

If you made a mistake or forgot to include information on a form or lodge one, contact us and we will help you fix that issue.

For more information see GST property settlement online forms and instructions.

Reporting non-compliance

If you're concerned someone is doing the wrong thing, you can tell us about it confidentially.

Your information gets to the right area if you mention some key words, such as:

• GST at settlement
• sale of property
• Form one
• Form two.

For more information see Report fraud, phoenix, tax evasion, shadow economy activity, or unpaid super.

Data matching

We regularly receive data from state and territory land title offices and revenue agencies with details that include sales and transfers of real property.

See also  

• Sale of property
• Data matching

Penalties

Penalties may apply for suppliers or purchasers:

• Supplier penalties
• Purchaser penalties

Supplier penalties

A supplier who fails to provide a supplier notification to a purchaser may incur one of the following penalty types:

• Strict liability offence – 100 penalty units, which may be prosecuted before the court
• Administrative penalty – 100 penalty units (not applied if the strict liability offence is prosecuted).

Penalties won't apply if you:

• reasonably believed you weren't required to meet the notice requirements
• made an honest and reasonable mistake about how the notice requirements apply to a particular supply.

Purchaser penalties

There are two types of penalties for purchasers:

• If a purchaser fails to withhold or pay an amount required, the administrative penalty is equal to the amount the purchaser was required to pay. Exceptions to this include when  
  • there's been reasonable reliance on the supplier's notice
  • the purchaser has given the supplier a bank cheque payable to the Commissioner of Taxation for the withholding amount.
   
• If a purchaser fails to notify us they must withhold (that is, they haven't lodged the two online forms)  
  • Failure to lodge administrative penalty – one penalty unit for each 28-day period (up to a maximum of five penalty units)
  • higher penalty units may be applied to entities based on turnover.
   

For more information see Penalties.

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Transitional arrangements ended 30 June 2020

The GST at settlement transitional arrangements ended 30 June 2020.

From 1 July 2020 contracts entered into before 1 July 2018 for new residential premises or potential residential land may be subject to the withholding obligations under GST at settlement.

When lodging Form one for a property with a contract entered into before 1 July 2018 and settlement is after 30 June 2020, complete the form either through:

• our website – with a contract date of 1 July 2018 to allow the form to be lodged.
• Property Exchange Australia (PEXA) – enter the actual contract date.

The GST at settlement process doesn't apply to contracts entered into before 1 July 2018. This is where any payment or consideration for the supply (other than a deposit) is provided before 1 July 2020 (that is, settlement is before 1 July 2020).

See also  

• LCR 2018/4 Purchaser's obligation to pay an amount for GST on taxable supplies of certain real property

Return to GST at settlement.

Foreign resident capital gain withholding and GST at settlement

If you're selling residential premises or potential residential land in Australia it can be subject to both:

• foreign resident capital gain withholding (FRCGW)
• GST withholding obligation (GST at settlement).

There is no precedence between FRCGW and GST at settlement. Both apply and hold no priority over each other.

A clearance certificate for FRCGW is only applicable to that measure. GST at settlement is still payable. They are treated independently of each other.

For more information see Paying the foreign resident capital gains withholding.

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History

The withholding obligation was announced in the May 2017 Federal Budget. The measure was introduced to ensure that payment of GST is not avoided by 'phoenixing' activity in the property sector involving property developers and vendors.

Phoenixing activity involves the use of insolvency to avoid the payment of debts, including taxes. ‘Phoenixing’ in the property development industry has grown significantly in recent years.

Paying GST at settlement will help prevent non-compliance by property suppliers who sell properties for a price that includes the GST and avoid remitting the GST to us. They may avoid tax by liquidating their businesses and restarting their business again under a different entity before their next activity statement lodgment.

Following Treasury consultation with key property industry and tax professional stakeholders, the new measure was introduced to Parliament into Schedule 1 of the Taxation Administration Act 1953 by Schedule 5 of Treasury Laws Amendment (2018 Measures No. 1) Bill 2018External Link. The bill received royal assent on 29 March 2018.

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Terms we use

Residential premises

At its simplest, residential premises are premises containing basic living facilities that are fit for human occupation as residential accommodation.

The sale or long term lease of residential premises is input taxed, except for two specific classifications of residential premises

• new residential premises – for example, houses, apartments and villas
• commercial residential premises – for example, hotels, motels and hostels.

If residential premises are input taxed it means that you don't charge GST if you sell it, and you can't claim back GST if you buy it, even if registered for GST.

For more information see GST and residential property.

New residential premises

New residential premises are residential premises where any of the following apply to the premises:

• they have not previously been sold (or subject to a long-term lease) as residential premises
• they have been created through substantial renovations (but note new residential premises of this kind are excluded from the withholding obligation)
• they are new buildings which have been built to replace demolished buildings on the same land.

Note: Residential premises cease to be new residential premises if they have been used solely for renting for a period of at least five years since they were constructed.

For more information see Property and registering for GST.

Potential residential land

Potential residential land is land that it is permissible to be used for residential purposes but does not contain any buildings that are residential premises – for example, houses and strata units.

It also includes land where local government zoning may permit a mixture of residential and commercial use.

Supplier

The supplier may or may not be the vendor under the contract or the registered proprietor on the certificate of title. The supplier is the entity liable for the GST on the property transaction.

Purchaser

The purchaser is the entity that has purchased the property.

If the property is sold, the purchaser is the entity that is buying the property. If the supply is a long-term lease, the purchaser is the entity that is leasing the property.

Tenants in common

If you are purchasing as tenants in common, each purchaser should be treated as a separate recipient. The withholding amount for each purchaser should be based on their portion of ownership. On the death or dissolution of an owner, the interest in the property does not automatically pass to the remaining owners. The total of the interests in the property must add up to 100%.

Joint tenants

With joint tenants, each owner has an undivided 100% interest in the property and if an owner dies or corporate owner dissolves, the interest in the property passes to the remaining joint tenants.

If you are purchasing as joint tenants, you will be jointly responsible for the total withholding amount.

Purchaser's or supplier's representative

Depending on which state or territory the property is located in, the purchaser's or supplier's representative for the conveyancing process can include either a:

• licenced conveyancer
• solicitor.

Note: Some jurisdictions may allow do-it-yourself (DIY) conveyancing.

Contract price

In most cases, the contract price is the GST-inclusive price of the supply as listed in the contract.

The contract price is normally used for calculating the amount a purchaser needs to withhold from the supplier and remit to us.

The contract price may be varied by the parties before completion.

Normal settlement day adjustments can be disregarded (for example, payments made for apportionment of council rates and water rates).

Note: If the contract includes non-monetary consideration, see price of the supply for calculating the withholding amount.

Price of the supply

The price of the supply is usually the contract price but in certain circumstances the price of the supply may also include non-monetary consideration (for example, land swaps).

If that is the case, the amount to be withheld by the purchaser needs to be calculated using the total consideration for the supply, and not just the monetary amount listed as the contract price.

There are special rules for calculating the withholding amount where the contract is between associates and the contract price is less than the GST inclusive market value of the property.

Withholding amount

The amount a purchaser must withhold and pay to us (rounded down to the nearest dollar) is generally either:

• 1/11th of the contract price (for taxable supplies)
• 7% of the contract price (for margin scheme supplies)
• 10% of the GST exclusive market value of the supply for supplies between associates (for consideration less than GST-inclusive market value).

Note: If the contract includes non-monetary consideration, see price of the supply for calculating the withholding amount.

Long term leases

Long term lease means a supply by way of lease, hire, or licence (including a renewal or extension of a lease, hire or licence) for at least 50 years if:

• at the time of the lease, hire or licence, or the renewal or extension of the lease, hire or licence, it was reasonable to expect that it would continue for at least 50 years
• the terms of the lease, hire or licence, or the renewal or extension of the lease, hire or licence, as they apply to the recipient are substantially the same as those under which the supplier held the premises. This is unless the supplier is an Australian Government agency.

Property subdivision plan

A property subdivision plan means a plan for the division of real property that has been registered under an Australian law with the relevant state or territory land titles office. Examples include:

• strata plans
• community plans
• subdivision plans.

We consider that where the physical description of a parcel of land is changed and identified in a registered deposited plan, that parcel of land is ‘included in a property sub-division plan’. The purpose the deposited plan was registered is not relevant (for example, if it is a consolidation or amalgamation or a division).

Registered entity acquiring land for a creditable purpose

A GST registered entity who acquires land for a creditable purpose is not subject to a withholding obligation.

An entity will acquire property for a creditable purpose if they are registered for GST and they acquire it, to any extent, in carrying on an enterprise and the acquisition is not related to making input-taxed supplies or of a private or domestic nature.

Note, a purchaser under the margin scheme may acquire property for a creditable purpose although it isn't a creditable acquisition.

You can check whether an entity is registered for GST by searching ABN LookupExternal Link on the Australian Business Register. You can rely on a copy of the search on a relevant date.

You can rely on either written correspondence from an entity, or a statement in the relevant contract, as to whether the entity is acquiring the land for a creditable purpose.

Taxable supply

A supply will be a taxable supply if you are registered (or required to be registered) for GST and the supply is:

• made for consideration
• made in the course or furtherance of an enterprise you carry on
• not a GST-free or input taxed supply – for example, a supply made as  
  • part of a GST-free supply of a going concern
  • a supply of GST-free farmland.
   

For more information see GST definitions – sales (supplies).

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Resources

Law companion rulings

• Law companion ruling LCR 2018/4 Purchaser's obligation to pay an amount for GST on taxable supplies of certain real property describes how we apply the law.

Legislation

• Treasury Laws Amendment (2018 Measures No. 1) Bill 2018External Link

Webinars

Watch:

• Webinar – An update about GST at settlementExternal Link
• Webinar – GST at settlement – OverviewExternal Link
• Webinar – How to get GST at settlement rightExternal Link
• Webinar – GST at settlement – Cutting through the complexitiesExternal Link

Online forms and information

The following information is available to help you meet your obligations:

• GST property settlement online forms and instructions
• How to pay the withholding amount
• GST at settlement – a guide for purchasers and their representatives
• GST at settlement – a guide for suppliers and their representatives
• GST and property
• GST and the margin scheme

Return to GST at settlement.

If you are selling or buying new residential premises or potential residential land, you need to comply with the GST at settlement process.