New residential premises, new residential subdivisions and long term leases are in the direct line of sight of the new GST withholding legislation, set to take effect on 1 July 2018.
The winds of change are picking up speed with the commencement date of the GST Withholding legislation rapidly approaching, signalling serious change in the property sector. On 1 July 2018, the Federal Governments' GST Withholding regime for the supply of real property comes into force, specifically targeting new residential premises, new residential subdivisions and long term leases.
What you need to know
- The purchaser is responsible for remitting GST on its purchase of new residential subdivided land or new residential premises to the ATO if they are not registered for GST.
- If the contract of sale is a plus GST sale, the purchaser must remit 1/11th of the contract price to the ATO.
- If the contract of sale is on the margin scheme, the purchaser must remit 7% of the contract price to the ATO.
- If the purchaser is registered for GST, the withholding obligations will not apply for the sale.
What you need to do
In the lead up to 1 July 2018, there are some important steps you need to take to cater for the legislative change.
- If you are a vendor, you must provide notice to the purchaser whether or not the withholding obligations will apply.
- You will need to review all your existing contracts in light in the incoming regime and make appropriate adjustments.
- Pro forma contracts will need to be updated prior to 1 July 2018 to comply with the new requirements under the GST Withholding legislation.
What is the transition period?
There is a two year transition period applicable to the new legislation. Whether or not the new regime will apply to your development will depend on when settlement is to occur and the supply is made to the purchaser.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
