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.
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For contracts entered into from 1 July 2018, follow these steps:
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:
See also:
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:
Examples of withholding at settlement
Example 1: Withholding at settlement – new residential premises
BuildCo has developed an apartment block and is making taxable sales of new residential premises.
On 14 September 2018, Kath enters into a contract to purchase a new apartment from BuildCo. The contract price is $900,000 and she pays a 10% deposit of $90,000. The sales contract states the margin scheme doesn't apply and includes the supplier's notification to the purchaser that there's a withholding obligation of $81,818 (1/11th of $900,000).
Kath authorises her conveyancer to lodge Form one and Form two on her behalf by providing a signed declaration.
Kath's conveyancer uses the information from the seller's notification to complete Form one: GST property settlement withholding notification online and gets a PRN and LRN from the confirmation screen.
Settlement occurs on 25 November 2018. At settlement, Kath's conveyancer:
- lodges Form two: GST property settlement date confirmation using the PRN and LRN when Form one was lodged
- pays the balance of the apartment contract price to BuildCo of $728,182 ($900,000 less $90,000 deposit less $81,818 withholding amount)
- pays the withheld amount of $81,818 to us electronically using the PRN obtained when Form one was lodged.
BuildCo lodges their activity statement (no other taxable supplies were made) for the December quarter reporting:
- the full sale price of $900,000 at label G1
- the GST payable of $81,818 at label 1A.
When the activity statement is processed, BuildCo receives a credit of $81,818 representing the amount withheld and remitted by Kath.
End of example
Example 2: Withholding at settlement – potential residential land
On 10 September 2018, Land Co purchases a vacant block of land with the intention of subdividing it into two lots. The block is zoned to allow residential use and doesn't have any buildings.
Land Co registers the plan of subdivision and makes taxable supplies of both lots of vacant land.
On 25 September Land Co enters into a contract to sell one of the lots to Nick for $770,000. Nick pays a 10% deposit of $77,000 with the balance due at settlement. As the sale isn't using the margin scheme and Nick isn't carrying on an enterprise, Nick has a withholding obligation of $70,000 (1/11th of $770,000).
Land Co includes its withholding notification to the purchaser in the contract. Nick provides his solicitor with a signed declaration authorising them to lodge the withholding forms on his behalf. The information from the contract enables Nick's solicitor to complete Form one: GST property settlement withholding notification online and get a PRN and LRN from the confirmation screen.
Settlement occurs on 21 November 2018. At settlement, Nick's solicitor:
- lodges Form two: GST property settlement date confirmation using the PRN and LRN from Form one
- pays the balance of the contract price to Land Co of $623,000 ($770,000 less $77,000 deposit less $70,000 withholding amount)
- pays the withheld amount (quoting the PRN from Form one) of $70,000 to us using BPAY ®.
Land Co lodges their activity statement for the December quarter and reports
- the full sale price of $770,000 at label G1
- the GST payable of $70,000 at label 1A.
When processed, Land Co receives a $70,000 credit for the amount withheld and remitted by Nick.
End of exampleSee also:
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