GST at settlement – a guide for suppliers and their representatives

Suppliers obligations

Suppliers of new residential premises or potential residential land have certain tax obligations under the GST at settlement measure. Suppliers must notify purchasers in writing as to whether or not they have a withholding obligation when they sell either:

• residential premises
• land that could be used to build new residential property (potential residential land) to a purchaser who is not a GST registered entity acquiring the land for a creditable purpose.

You must also determine if you are running an enterprise. Even a one-off property sale could mean you have a GST obligation.

For more information, see:

• GST at settlement
• GST at settlement process
• Transitional arrangements ended 30 June 2020
• Terms we use

Determine if you are running an enterprise

A supply of new residential premises or potential residential land in Australia is a taxable supply if you're 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 or a supply of GST-free farmland.

If you're registered or required to be registered for GST and the supply is part of your business, GST at settlement may apply.

Generally, you aren't carrying on an enterprise if your property transactions are for private purposes, such as constructing or selling your family home.

Examples of an enterprise

Examples of activities that may be regarded as an enterprise include when you:

• buy property with the intention of immediate resale at a profit
• develop property to sell.

Even a one-off property transaction may be an enterprise.

You must register for GST:

• when your business or enterprise has a GST turnover (gross income minus GST) of $75,000 or more (or $150,000 for non-profit organisations)
• when you start a new business and expect your turnover to reach the GST threshold (or more) in the first year of operation
• if you're already in business and have reached the GST threshold.

 

Selling the family home

If you aren't carrying on an enterprise and not registered for GST (or required to be registered), you won't be making a taxable supply when you sell your family home.

For more information see:

• Property and registering for GST
• GST property decision tool
• Registering for GST
• Applying for an ABNExternal Link

Mortgagee in possession

Where a mortgagee in possession has the obligation to report the property transaction and pay any GST amount payable, they would also have the right to any credits.

Where it has been determined that they need to be registered for GST, the mortgagee in possession must report the property sale and GST on the relevant BAS. The GST property credit will be applied as per the normal GST at settlement process.

Where it has been determined that they are not registered or required to be registered for GST, they must contact us for tailored technical assistance to report the sale and arrange to pay any GST on the sale (section 105-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)).

For more information, see GST and mortgagees in possession.

GST at settlement process

For an overview of the steps involved in the GST at settlement process , see GST at settlement process.

Supplier notification

You must notify the purchaser in writing before settlement of whether or not they have a withholding obligation – this is called a 'supplier notification'.

You have a notification obligation if you supply a long-term lease or sell:

• residential premises
• land that could be used to build new residential property (potential residential land) to a purchaser who isn't a GST registered entity acquiring the land for a creditable purpose.

If the contract allows a purchaser to be substituted for another entity, or the supply is made to a nominee, you may provide the notice to the entity listed on the transfer documents.

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

Note: If you fail to provide a written notice, penalties may apply.

For more information, see Properties that are included and excluded.

What to include in a supplier notification

If your purchaser:

• doesn't have a withholding obligation – your notice must make it clear that 'no withholding is required'
• has a withholding obligation – your notice must include
  • the name and Australian business number (ABN) of all suppliers
  • GST branch number (if applicable)
  • the amount they must withhold (rounded 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).

If you don't supply the correct information:

• you may be penalised for providing incorrect or misleading information, and
• it may cause delays in the GST property credits being allocated into your GST property credit account.

Name and ABN of all suppliers

The supplier is the entity required to report the property transaction on their business activity statement (BAS) – that is the entity liable for the GST.

If there are multiple suppliers and they're all required to report on their activity statement, the name and ABN of each supplier must be provided to the purchaser.

If you are:

• part of a partnership – include the partnership name and ABN
• a member of a GST group – one member of the group (the representative member) completes the activity statement and accounts for GST on behalf of the whole group. Provide the name and ABN of the representative member to the purchaser.
• a corporate trustee – in most situations a corporate trustee entity holds an Australian company number (ACN) only and is not registered for an ABN or GST. Commonly, the corporate trustee acts as trustee for a self-managed super fund (SMSF) or a trust that is registered for GST and liable for GST on the supply. You must determine which entity is liable for GST on the property sale. Once determined, that entity must be treated as the supplier for GST at settlement purposes.

Check if the ABN is registered for GST on ABN LookupExternal Link to ensure the credit is allocated correctly.

If incorrect or incomplete supplier information is provided to the purchaser, this may result in delays in processing property credits or penalties being applied.

If suppler details change after notification, see Information in the supplier notification changes.

Calculating the withholding amount

The amount provided should be a whole dollar amount. Round cents down to the nearest dollar.

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

The contract price may be varied by the parties before settlement. Normal settlement day adjustments can be disregarded (for example, adjustments to reflect apportionment of council rates or water rates).

If the contract includes non-monetary consideration (for example, land swaps) the amount to be withheld needs to be calculated as a portion of the total monetary consideration (including GST) plus the GST inclusive market value of the non-monetary consideration.

This is defined in GST law as the price of the supply.

When the withholding is due

The purchaser must make the withholding payment (rounded down to the nearest dollar) to us by the due date:

• under a standard land contract – the day of settlement
• under an instalment contract – the day the first instalment is paid.

If your supply is to an associate for no consideration, your associate must pay the withholding amount on the day on you make the supply.

Information in the supplier notification changes

If the required information changes before or after settlement, you must provide a new notice to the purchaser. The purchaser needs to contact us to organise the forms to be amended or cancelled.

If the credit in the GST property credit account has been allocated to an incorrect supplier, submit a transfer request. See How to submit a missing credit or transfer request.

For more information, see:

• How to amend or cancel your forms
• Property and registering for GST
• Change in use of your property

Supplier credit

The credit for the amount withheld is allocated to your GST property credit account. If there are multiple suppliers, the credit is the equivalent proportion of the withheld amount.

Viewing GST property credits

Once the purchaser has paid the withholding amount, the GST property credit is allocated to your GST property credit account. We send an email confirmation to the email address on your activity statement account. The email includes identifiers for the property transaction and confirms the credit has been received.

You can view your GST property credit account through ATO online services.

Log in to ATO online services for the relevant entity:

• ATO online services for individuals and sole traders
• Online services for agents
• Online services for business.

For Online services for business, select:

LodgmentsGST property credits.

For Online services for agents, select:

BusinessGST property credits.

You can check that the credits are available before you lodge your activity statement.

If a credit isn't showing 2 weeks after settlement or you identify the credit has been allocated to the incorrect entity, then submit a missing credit or transfer request.

Even if your credit is missing, you must lodge your activity statement by the due date or request a deferral to avoid a failure to lodge on time penalty.

Effective date of the credit

When the credit is located and transferred to your account it will apply with an effective date of the:

• settlement date
• payment receipt date if the purchaser paid the withholding amount more than 28 days after settlement.

If the purchaser pays late, the credit may apply to a later activity statement period. You must still report the property sale in the activity statement period in which settlement occurred.

General interest charges (GIC) may apply if the activity statement liability remains unpaid because the credit was applied to a different period.

Where a company has been wound up, contact us for further assistance.

What to report on your activity statement

The GST liability on the taxable supply remains with you. There are no changes to what you report on your activity statement.

Reporting

Report the taxable supply together with:

• any other supplies
• acquisitions
• GST liabilities
• GST input tax credits.

Completing your activity statement

You are liable for the GST of the property transaction in the period that settlement occurred. You need to report:

• label G1 Total sales – all property sales
• label 1A GST on sales – the actual GST on sales and account for the margin scheme if applicable
• label 1B GST on purchases – the total amount of GST credits (including any adjustments) the supplier is eligible to claim.

Don’t report the GST property credit at label 1B GST on purchases.

After lodging your activity statement, a credit for the withholding amount is transferred from the GST property credit account into your activity statement account and can be applied against the net amount.

We will refund surplus credits from the activity statement account to you, subject to normal GST refund processes.

For more information, see Completing your BAS for GST.

Margin scheme

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

Only apply the margin scheme if the sale of a property is taxable and ensure it's written in the contract. You must determine if you are eligible to use the margin scheme to work out how much GST you must pay.

Generally, the GST is based on the difference between:

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

There are different methods to calculate the margin, depending on the purchase date.

Amending your activity statement

If you make an error on your activity statement, including omitting a property sale at G1 (and the related GST at label 1A) or incorrectly reporting the GST property credit at label 1B you must amend your activity statement as penalties may apply. For more information, see Revising an earlier business activity statement.

Purchaser gives you a cheque for the withholding amount

In some cases, instead of paying the withholding amount directly to us, a purchaser may give you a bank cheque, made out to the Commissioner of Taxation for the withholding amount.

When this happens, you're acting as the purchaser's agent. The purchaser must provide you with a GST withholding payment slip and payment reference number (PRN).

The purchaser is not discharged from their withholding obligation until we receive the cheque, although they will generally be protected from penalties while you are acting on their behalf.

When you send the cheque to us, make sure you include the GST withholding payment slip and PRN. If these are not provided, it may delay the GST property credit being allocated to your GST property credit account.

For more information, see How to pay the withholding amount.

Where the purchaser pays the full contract price at settlement

In some cases, the purchaser may pay you the full contract price at settlement, rather than withholding an amount and paying it directly to us.

If this occurs and a GST withholding obligation applies, the purchaser is still required to:

• lodge Form one and Form two, and
• ensure the withholding amount is paid to us using the correct PRN.

Where the purchaser has paid you the full contract price, you must return the withholding amount to the purchaser so they can pay it to us.

Until we receive the withholding payment, the purchaser’s withholding obligation remains outstanding. This can result in follow-up action if the payment is delayed or can’t be matched.

For more information, see How to pay the withholding amount.

Purchaser's requirement to lodge Forms one and two

You can ask your purchaser to provide you with evidence they have lodged Form one and Form two (for example, copies of the forms lodged or a copy of the confirmation email from us). You can also make this a contractual requirement.

If the forms are lodged using an e-conveyancing platform, you can view the details of the forms lodged through the relevant platform

You should view these details before settlement occurs to ensure no changes are required. If changes are needed, you must provide the purchaser with a new written notification.

Penalties may apply if the purchaser fails to notify of their withholding obligation, including where they don't lodge Form one or Form two and make the required withholding payment.

For more information, see Multiple supplies in one contract.

How to apply for a refund

If a purchaser withheld an amount in error and paid it to us, you may be able to seek a refund.

Do not use activity statement label 1B (GST on purchases) to claim GST withholding amounts. Credits are applied through your GST property credit account.

For more information, see How to apply for a refund.

Credits allocated to an incorrect supplier

If the GST property credit has been allocated to the incorrect supplier, submit a transfer request and include the details of the correct supplier.

If you did not sell the property and are unsure who the correct supplier is, submit a transfer request and include a statement advising that you are unsure who sold the property.

How to submit a missing credit or transfer request

If the credit hasn't transferred from your GST property credit account to your integrated client account, check you have done the following before contacting us:

• You have lodged your activity statement for the relevant period – the property sale must be reported in the reporting period in which settlement occurred.
• If you lodged your activity statement within the last 24 to 48 hours – allow up to 48 hours for the credit to transfer.

The credit will not transfer from the property credit account to your integrated client account until after the activity statement has been lodged.

If you have lodged your activity statement, it has been more than 48 hours and the credit hasn't transferred, submit a transfer request.

If a credit isn't showing on the GST property credit account after 2 weeks of settlement, check the following with your purchaser before contacting us:

• The purchaser has lodged the 2 online forms and made payment to us.
• The correct supplier details were entered on Form one.

If the supplier details are correct and the purchaser has met their obligations, submit a missing credit request.

If the credits were allocated to an incorrect supplier or GST branch, then submit a transfer request.

Submit a missing credit request

You can submit your request via:

• Online services for businessExternal Link using Secure mail, complete the following
  • select New message
  • select View more topics under Topic
  • select GST under Other topics
  • select GST at settlement under Subject
  • complete the required details
  • tick the Declaration box and send to us.
• Online services for agents using the Mail option, complete the following
  • select New message
  • select GST under Subject
  • select GST at settlement under Topic
  • complete the remaining fields and send to us.

All mail messages should:

• provide the reason for your enquiry
• provide the following details for each missing credit
  • supplier name the credit should be allocated to
  • supplier ABN the credit should be allocated to
  • the purchaser name (or names)
  • the credit amount
  • lodgment reference number (LRN) or payment reference number (PRN)
  • property details
  • settlement details
• attach any supporting documentation.

Alternatively, phone us on 13 28 66 Fast Key Code 3 4.

Submit a transfer request

You can submit your transfer request via:

• Online services for businessExternal Link using Secure mail, complete the following
  • select New message
  • select View more topics under Topic
  • select GST under Other topics
  • select GST at settlement under Subject
  • complete the required details
  • tick the Declaration box and send to us.
• Online services for agents using the Mail option, complete the following
  • select New message
  • select GST under Subject
  • select GST at settlement under Topic
  • complete the remaining fields and send to us.

All mail messages should:

• provide the reason for your enquiry
• provide the following details for each missing credit
  • supplier name and ABN the credit is currently allocated to
  • supplier name and ABN the credit should be allocated to
  • what BAS period the credit relates to
  • branch number (if applicable)
  • the purchaser name or names)
  • the credit amount
  • lodgment reference number (LRN) or payment reference number (PRN)
  • property details
  • settlement details
• attach any supporting documentation.

Alternatively, phone us on 13 28 66 Fast Key Code 3 4.

FRCGW vs GST at settlement

A separate withholding obligation may apply for foreign resident capital gains withholding (FRCGW). This is often confused with GST at settlement. Each obligation has its own separate forms and requirements, and in some cases both obligations may apply to the same property sale.

If a GST at settlement withholding obligation applies but the purchaser has incorrectly lodged FRCGW forms, you should contact the purchaser. You will not receive a GST property credit until the purchaser corrects the error and lodges the GST at settlement forms.

If the purchaser has incorrectly lodged GST at settlement forms where FRCGW applies, you should contact the purchaser and ask them to cancel the incorrect forms.

If no GST at settlement withholding obligation applies, the supplier or the purchaser may submit a refund request. We will work with the relevant parties to determine who is entitled to the refund. For more information, see How to apply for a refund.

Compliance and penalties

There are penalties for failing to provide a supplier notification to a purchaser.

For more information, see GST at settlement – Penalties and how to report non-compliance.

Resources

Law companion ruling

• 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 2018 (PDF, 1,479KB)External Link

Webinars

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

Online forms and information

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

• GST at settlement
• GST at settlement process
• GST property settlement online forms and instructions
• GST at settlement – a guide for purchasers and their representatives
• GST and property
• GST and residential property
• GST and the margin scheme
• GST definitions