GST to be Withheld in Property Purchases

REAL ESTATE
16-Apr-2018

Proposed Treasury Laws Amendment (2018 Measures No.1) Bill 2018 changes the process by which the Federal Government recovers GST in a number of residential real estate transactions.

If passed, property buyers will need to be aware of the legislation as it could affect their transaction. The legislation will affect property deals settled on or after the first of July, 2018.

 

Purchaser Requirements

Sales and long-term leases for new residential properties and residential land made on or after 01-07-18 will fall under the new rules, requiring purchasers to withhold GST from the settlement. Purchasers will then pay that GST to the Australian Tax Office.

Deals created before 01-07-18 will also incur this new condition if anything other than the deposit is first paid on or after 01-07-20

The rate required by the ATO is 1/11th the property’s price – unless the margin scheme is used to calculate the GST. If the margin scheme is used, the rate will be 7% of the property’s price.

Vendor Requirements

Vendors will give property buyers written notice of the new legislation’s terms for all transactions where the property is supplied on or after 01-1-18.

Vendors will also be required to supply notices of all sales, whether they are new or not – but not when they are commercial residential properties or in other cases, dependant on the nature of the purchaser.

Vendors are advised to follow the legislation closely for up-to-date information related to these requirements.

Included Properties

The term New Residential Properties covers residential properties that haven’t been sold as residences previously. It does not cover new residences created through renovations or commercial premises.

The term Potential Residential Land covers vacant land in a subdivision plan zoned for residential purposes. It does not cover land that contains a residence or commercial property.

Cover your Bases

This legislation could affect development agreements between owners and developers. If you have a sale in preparation or in progress, it is important to take these new requirements into account.

Will this legislation affect your investment? Our experienced team is always on the leading edge of all things property and real estate – contact us for expert assistance at 9663 1117. 


 

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