Guidance on GST withholding rules for property developers applicable from 1 July 2018.
From 1 July 2018, a GST withholding obligation will be imposed on purchaser of certain residential premises, including certain vacant land. Purchaser must withhold the ‘GST component’ of the sale price of affected land and pay it directly to the Commissioner instead of the seller. Transitional rules may apply for contracts signed prior to 1 July 2018.
Property developers will only be impacted by a GST withholding where they sell:
The withholding rules apply to both sales and long term leases (generally, granted by government for 50 years or more).
The rate of withholding is fixed at 1/11th of the contract price, or 7 percent when the margin scheme applies to the sale and the purchaser is not an associate of the seller. Purchasers must withhold these amounts from settlement funds and remit the amount directly to the ATO. So affected sellers will only ever receive the GST exclusive proceeds (or a proxy for margin scheme sales) at settlement. The amount paid to the ATO will be credited against the seller’s GST liability in its BAS.
Our factsheet highlights the impact of the GST holdings on property developers, the type of property sales affected, the rate of the holding and the notification obligations. Contact Michelle Bennett or Gary Chiert to discuss further.