GST on property settlements

From 1 July 2018, certain purchasers of new residential premises or potential residential land and lessees under long-term leases will be required to withhold a GST amount from the price of the supply for payment to the ATO on or before settlement. More

Lenders should consider whether borrowers who are buying new residential premises and potential residential land have a withholding obligation.

Instead of paying the full contract price to the GST registered supplier (for example, vendors, sellers, property developers) at settlement, a purchaser is now required to withhold an amount from the contract price and pay that amount directly to the ATO.

The withholding amount is due on or before the day that consideration for the supply (other than a deposit) is first provided. If the contract is an instalment contract that will be the day the first instalment is paid otherwise it will be the day of settlement.

Sellers should give notice to Purchasers in accordance with section 14-255(1)(a) of the Withholding Law (Taxation Administration Act 1953 (Cth) Schedule 1) whether the Purchaser is or is not  required to make a payment under section 14-250 of the Withholding Law in relation to the supply of the Property. If the Withholding Law applies, under section 14-255(1) of the Withholding Law, the seller is required to give further details prior to settlement.

Purchasers do not need to register for GST just because they have a withholding requirement.

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.

Law Companion Ruling LCR 2018/4

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