The new Federal legislation on the payment of GST in property developments took effect as at July 1st 2018. The legislation is aimed at preventing businesses in the property development area failing to remit the GST to the Australian Taxation Office (ATO) after a sale settles.
New Federal legislation is designed to stop businesses in the property development area failing to pay the GST to the Australian Taxation Office after a sale settles. Over $1.8 billion of GST revenue has been written off over the last 5 years.
“Phoenixing” occurs when, after settlement, the vendor business deliberately dissolves before the next Business Activity Statement (BAS) is due and does not pay its GST liability. The business may then re-invent itself as another entity (but, of course, the GST collected at settlement is never paid to the ATO).
Where a contract for new residential premises or potential residential land is entered into on or after 1 July 2018 (or before 1 July 2018 which settles on or after 1 July 2020), purchasers pay the GST component of the purchase price directly to the ATO instead of the supplier (vendor).
From 1 July 2018, suppliers of residential premises or potential residential land must notify purchasers in writing whether they are/are not required to withhold an amount for GST from the purchase price and pay the amount to the ATO.
The purchaser then completes and lodges online a Form 1 GST Property Settlement Withholding Notification and receives a Payment Reference Number (PRN) and a Lodgement Reference Number.
The purchaser then lodges online a Form 2 GST Property Settlement Date Confirmation with PRN and cheque or electronic transfer at or before settlement (this second form allows for changes in settlement date) and pays that amount to the ATO at settlement.
The supplier (vendor) then lodges their BAS when due and, once that BAS is processed, the withheld amount paid to the ATO by the purchaser is available as a credit against the BAS net amount.
Other Federal government schemes (aimed at opposite demographics) also start 1 July 2018:
- the First Home Super Saver Scheme (FHSSS); and
- the Superannuation Downsizers Contribution Scheme.
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By Wendy Chamberlain
Copyright 2018 | All Rights Reserved
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Agent or Sellers Advocate gives her buying and selling clients an experienced voice they can trust when it comes to negotiating to buy or sell something as important as their home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.wendychamberlain.com.au for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.