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  • 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.

    Media: GST at settlement process
    http://tv.ato.gov.au/ato-tv/media?v=bd1bdiunw5u8wb External Link (Duration: 2:31)

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

    Step 1: Supplier must notify purchaser

    The supplier is the entity that is required to report the property transaction to the ATO on their BAS.

    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 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 NT) have revised their standard land contracts to include the notification.

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

    If the purchaser does have a withholding obligation then 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).

    See also:

    Step 2: Purchaser or representative lodges Form one – GST property settlement withholding notification

    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. Depending on the state or territory the property is located in, the purchaser's representative can include either a conveyancer or solicitor.

    The purchaser will include the information from the supplier’s notice, their details and the expected settlement date. Some information required in Form one 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 (which you can print) will appear with a payment reference number (PRN) and lodgment reference number (LRN).

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

    You need to retain these numbers as you will need them when lodging Form two: GST property settlement date confirmation and when making your payment.

    See also:

    Step 3: Form one email confirmation

    If the purchaser has elected to receive emails on Form one an email will be sent to the purchaser confirming that Form one has been processed by us. This will include a summary of the key particulars 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 – GST property settlement date confirmation

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

    Under a 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.

    When the form has been successfully lodged an online confirmation screen will confirm that the form has been successfully lodged. This records the purchaser’s withholding liability against the purchasers account as occurring on the settlement date. You can print the confirmation screen and keep it with your records.

    See also:

    Under an instalment contract

    Under an instalment contract the timing of the obligation to pay the withholding amount is different to a standard land contract.

    The obligation to pay the withholding amount under an instalment contract is on or before the date the first payment is made (other than a genuine deposit).

    Under an instalment 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 the first instalment
    • on the day of the first instalment
    • on the next business day after the first instalment.

    When the form has been successfully lodged an online confirmation screen will confirm that the form has been successfully lodged. This records the purchaser’s withholding liability against the purchasers account as occurring on the date that the first instalment is made. You can print the confirmation screen and keep it with your records.

    See also:

    Step 5: Purchaser makes the payment

    Once Form two: GST property settlement date confirmation has been lodged, you are required to pay the withholding amount (rounded down to the nearest dollar) when settlement occurs. You must quote the PRN you received when Form one was lodged.

    See also:

    Step 6: Payment email confirmation

    If the purchaser has elected to receive emails on Form two, an email will be sent to this email address once Form two and the payment have both been processed by us.

    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 will be the equivalent proportion of the withheld amount.

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

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

    Note: You can't view this account on the Tax Agent Portal.

    See also:

    Step 8: Supplier lodges business activity statement (BAS)

    The supplier must report on their BAS:

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

    The property sale must be reported in the BAS period in which settlement occurred. For example, if the property settled on 5 December, you must report the property transaction in the December BAS.

    Note: the withholding payment that is paid by the purchaser that is allocated as a credit to the supplier's GST property credits account must not be reported on the BAS. It is the actual GST on the sale that needs to be reported on the BAS at label 1A.

    The credit allocated to the supplier's GST property credits account will be transferred into the suppliers activity statement account when the relevant BAS is lodged.

    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 for the purchase of a new apartment from BuildCo. The contract price is $900,000 and Kath pays a 10% deposit of $90,000. The contract of sale states that the margin scheme doesn't apply and includes the supplier's notification to the purchaser that there is 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 obtains 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 obtained 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 BAS (no other taxable supplies were made) for the December quarter reporting the full sale price of $900,000 at label G1 and the GST payable at label 1A of $81,818. When the BAS 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 does not contain any buildings.

    Land Co registers the plan of subdivision and proceeds to make 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 is not under the margin scheme and Nick is not 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 into the contract. Nick has provided his solicitor with a signed declaration authorising his solicitor 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 obtain 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 obtained 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 obtained from Form one) of $70,000 to us using BPAY.

    Land Co lodges their BAS (no other taxable supplies were made) for the December quarter. They report the full sale price of $770,000 at label G1 and the GST payable of $70,000 at label 1A. When the BAS is processed, Land Co receives a $70,000 credit for the amount withheld and remitted by Nick.

    End of example


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      Last modified: 22 Oct 2019QC 55431