The new GST withholding obligations are discussed in detail in the By Lawyers Purchase commentaries for each state, under the heading ‘Withholding payment of GST on purchase of certain real property’.
By way of summary, from 1 July 2018 purchasers of new residential premises or potential residential land are required to withhold an amount of the contract price and pay this directly to the ATO as part of the settlement process.
This does not affect the sales of existing residential properties, or the sales of new or existing commercial properties. However, for all residential premises or potential residential land, if the the vendor is registered, or required to be registered, for GST then they must notify the purchaser as to whether or not GST withholding applies – even if it does not apply.
Where withholding applies, purchasers need to:
- split the amount of GST from the total purchase price;
- pay the GST component directly to the ATO as a disbursement at settlement;
- pay the GST exclusive purchase price to the vendor.
The liability for the GST remains with the vendor and there are no changes to how vendors lodge their business activity statements.