New GST Withholding on Residential Property
News, Tax & Accounting

New GST Withholding on Residential Property

You may remember as part of the 17/18 Budget the Federal Government announced changes to how GST collected on ‘New Residential Property’ would be passed onto the ATO.  Well the exposure draft of the legislation has been released so we now have some more details on the changes the government is looking to make.

It is proposed that from 1 July 2018, purchases of new residential premises and new residential subdivisions will withhold the GST portion from the seller and remit it directly to the ATO as part of the settlement process.

There will be a two-year transitional arrangement – meaning that contracts entered into before 1 July 2018 will not be affected – as long as they settle before 1 July 2020.

What does this mean?

For Purchases:

  • It means that it’s important that the GST component of the contract is clearly stated so your solicitor can handle settlement proceeds accordingly
  • It is not know whether purchasers will experience an increase in conveyancing costs due to additional work required by solicitors

For Property Developers:

  • It means that full settlement proceeds won’t be received, instead the GST component will be paid directly to the ATO at settlement,
  • Managing cash flow becomes more important as you won’t have use of GST portion of sales for the period between settlement and BAS lodgement.
  • If you are selling under the margin scheme it becomes important to clearly state the GST component of sale on the contract (the default if this isn’t done is 1/11th of the sale proceeds)
  • You will receive a credit on your BAS for amounts paid at settlement (not clear how you will check this balance)
  • Contracts entered into before 1 July 2018 and settled prior to 1 July 2020 are exempt from the proposed new measures

Recent Posts

Why Your Small Business Should Use Swell: A Cashflow Forecasting Tool

In the world of small business, keeping up with the latest data trends and maintaining a healthy cash flow can be quite demanding. This is where Lemonade Beach’s Cashflow Forecasting program, “Swell” steps in – a real time financial tracking and management tool that serves as your financial consultant and advisor.

Three Swell Levels to Transform Your Business: Snapper, Bells, and Mavericks

In this blog post, we delve into the three levels of our Swell Cashflow Forecasting tool: Snapper, Bells, and Mavericks. Each one is designed to address the specific needs of businesses at different phases of their journey.

Tax Time Occupation Guides

With tax time upon us, the ATO has pulled together some handy occupation guides to help you to better understand what you can and can’t claim on your 2022 income tax return.

You can download each of the guides in our latest blog article, or visit the ATO website for more information.

Tax Saving Strategies for Small Business Owners

Owning a small business presents various challenges, and managing taxes effectively is one of them. Although navigating the complex tax system may seem overwhelming, implementing effective strategies can lower your tax responsibilities and boost your profits. As tax specialists, we’ve pulled together some practical tax-saving strategies designed for small business owners.