As part of the 2017-2018 Budget, the Government announced it would be making changes to the way it collects GST on the sale of new residential premises or new subdivisions. The new regime is scheduled to commence on 1 July 2018.
From 1 July 2018, all purchasers of new residential premises or new sub-divisions are required to remit 1/11th of the purchase price directly to the ATO, rather than the developer remit the GST on their monthly or quarterly Business Activity Statement (BAS) as is currently the case. In a welcome addition to the bill tabled in parliament yesterday, the rate of withholding for transactions where the margin scheme applies will be reduced to 7% of the purchase price.
To facilitate the new regime, for all supplies of residential premises or land, all vendors will now be required to provide the purchaser with a GST Withholding Notice at least 14 days before settlement. The notice is required to specify:
- Whether the purchaser is required to withhold GST
- And if so, the relevant details of the vendor including ABN, amount of GST, timeframes for payment.
There are significant penalties for failing to provide a GST Withholding Notice:
- $21,000 for vendors
- $2,100 for purchasers
If you use the margin scheme the GST you remit upon sale may be less than the amount withheld by the ATO. Where this is the case, there are two options for recovering the overpaid GST:
- Claim a refund via your BAS for the relevant period; or
- Apply to the ATO for a refund (this option is not available if you lodge your BAS monthly)
To minimise the impact on your cash flow, if option 2 is available to you we’d suggest having the refund application ready to lodge right after settlement.
The new regime applies to all contracts entered into on or after 1 July 2018 unless the first consideration is provided on 1 July 2020 or later. So if you have a contract in place before 1 July 2018 and settlement occurs after 1 July 2018 you do not have any obligations under the new regime.
If you have any questions about the implications of this on your business or personal situation or would like to discuss this further, please feel free to contact our office on 07 3233 6400.