From 1 July 2018, purchasers of new residential premises may need to remit part of the purchase price directly to the ATO. If there is more than one purchaser, and those purchasers are not joint tenants, then each purchaser is required to remit their respective proportion of the withholding amount.
In an effort to ensure that all vendors pay GST when they sell new residential premises, the Commonwealth Government is in the process of introducing a GST withholding arrangement in the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018, which is currently being considered by the Senate.
The new measures will have a significant impact on the distribution of the settlement proceeds for new residential premises and this will need to be considered very carefully when developers are preparing their cashflow forecasts, discharge of mortgage payments and budgets. There are also notification requirements which will apply to vendors of all residential premises and penalties will apply if the required notification is not provided.
All contracts entered into after 1 July 2018 will be caught by the new regime. Contracts exchanged before 1 July 2018, but which settle after 1 July 2020 will also be caught.
The amount to be withheld by the purchaser on settlement and remitted to the ATO will be:
· 1/11th of the price if the margin scheme does not apply
· 7% of the price if the margin scheme does apply
If the transaction is a non-standard transfer, ie a transfer for other than market value, then withholding amount will be 10% of the market value.
All participants in the conveyancing process – developers, financiers and purchasers will be affected and each will need to properly consider the consequences of this new regime carefully.
For more information please click here to contact us or call 9525 8688.
