New GST Legislation
Here comes yet another change in our industry processes (just because we haven’t had enough changes in the last 12 months to get our heads around!) Although this ruling will not come into effect until 1 July 2018, we should be across this new gst legislation early.
What's the current process for GST?
The current process is if there is GST applicable on a sale of property, the developer/vendor pays the GST to the tax office when they submit their next BAS. Depending on when settlement occurs, this would be up to three months after settlement – with some business owners dissolving their company before the next BAS is due to avoid making the payment. This GST evasion is known as “phoenixing”.
What's going to happen now?
The obligation will now be on the purchaser to make the payment to the Australian Tax Office at settlement to eliminate the payment avoidance and delays. So in essence, the purchaser’s conveyancer will be collecting the tax payable and submitting it directly to the tax office. The amount payable will be calculated at 1/11th of the purchase price. The vendor (through their conveyancer) will need to notify the purchaser in writing at least 14 days prior to settlement as to whether they need to hold and pay the GST.
What transactions will this apply to?
This will be applicable on all new residential properties and all subdivisions of residential land. There will be a two year transitional period for contracts of these properties entered into before 1 July 2018 and settle before 1 July 2020. This transitional period will mainly affect off-the-plan purchases.
Article written by Miriam Errington
Please note that the information contained in this article is of a general nature only and does not constitute legal advice. Tuckfield Agent Solutions does not take responsibility for any errors or omissions obtained from the use of this information.