Buyers of Certain Residential Properties now required to withhold GST
by Kristy Collins, Senior Associate
Amendments introduced into Federal Parliament recently will result in purchasers of particular residential properties being obligated to withhold GST at the settlement of those properties and to onforward same to the ATO.
The withholding obligations will affect purchases from developers as opposed to individuals and cover “new residential premises” and “potential residential land”. It applies to all contracts entered into on or after 1 July 2018 and does have a retrospective effect to existing contracts, although there are certain parameters that need to be achieved for it to apply to these existing contracts.
The purchaser may be obliged to withhold either 10% of the original Contract Price or 7% of the Contract Price where the Margin Scheme applies.
There are penalties that can be imposed upon a purchaser who does not withhold and forward to the ATO the GST component. As a consequence, all parties involved in the types of contracts to which these amendments apply will need to be diligent as and from 1 July 2018 to ensure that all GST monies are retained and onforwarded to the ATO to avoid monetary penalty.
The amendments resulted from the ATO being frustrated in recovering GST from developers who, following the sale of their development lots, subsequently dissolved the company without on-paying GST to the ATO and as the ATO was an unsecured creditor, the ATO were not assured of recovering the monies owed to them.
This adds another positive obligation on purchasers which previously did not exist and, given the amount of new development existing in South East Queensland, will have a potential flow-on effect for conveyancing fees for purchasers and also liability issues for conveyancers and solicitors acting in the residential property transaction field.
Call Fedorov Lawyers now for advice to see if these new changes affect you.