From 1 July 2018 the GST Withholding Regime requires purchasers of new residential premises and potential residential land to withhold a GST component (1/11th or 7-9% if the margin scheme applies) from the purchase price and remit it directly to the ATO.
New residential premises are defined as property that has not previously been sold as residential property or results from the construction of a new building to replace demolished premises on the same land. It does not include commercial residential premises or premises that have been created through substantial renovation.
Potential residential land is defined as land that is permissible to be used for residential purposes but does not contain any buildings that are residential premises. It is limited to potential residential land that is included in a plan of subdivision. The regime does not apply if the land includes a building used for a commercial purpose or if the purchaser is registered for GST and the acquisition is for a ‘creditable purpose’.
Vendors of any residential premises (not just new residential premises) or potential residential land must provide purchasers with a GST withholding notice. The notice must state whether or not the purchaser is required to make a payment to the ATO. Non-compliance with the requirement to provide the notice carries substantial penalties.
For more information please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.