Purchasers of new residential property will be required to pay GST directly to the ATO from 1 July 2018.
The legislation to introduce GST withholding on the settlement of new residential property purchases or subdivision of potential residential land passed both houses of parliament on 28 March 2018, received assent on 29 March 2018 and commenced on 1 July 2018.
The withholding regime will impact residential property developers and purchasers, as well as lawyers, conveyancers, financiers and other parties who operate in the property development industry. The new Joint Form of General Conditions for the Sale of Land in Western Australia (2018) will be amended by annexure for the GST withholding regime.
The impetus for the legislative change is that currently some developers are making taxable sales of these types of properties and are failing to remit the GST collected from purchasers to the ATO, while still claiming input tax credits for development costs. There are also extreme cases where developers engage in phoenixing activities in order to deliberately avoid their tax obligations.
There is a transitional arrangement that excludes sale contracts entered into before 1 July 2018 as long as the property transaction settles before 1 July 2020 (to provide certainty for sale contracts that have already been signed).
2 July 2018