The ATO has recently further expanded property buyers’ obligations to withhold and remit monies when buying certain types of property.
Foreign resident CGT withholding scheme
The Foreign resident capital gains tax withholding regime CGT withholding regime was introduced in 2016 to assist in the collection of capital gains tax from the sale of properties owned by foreign residents. The scheme was expanded in 2017, increasing the withholding rate, and decreasing the threshold at which the scheme applies. Where it applies, the scheme requires buyers (through their legal representatives) to act as tax collectors.
GST withholding on new residential property.
Presumably because of the CGT scheme’s success, the Australian government has now introduced a similar scheme for GST, which took effect on 1 July 2018. The Government described the introduction of this scheme as a ‘clamp down’ on GST evasion in the property development sector.
From 1 July 2018, buyers (or long term lessees) of new residential premises or land in certain subdivisions of potential residential law must withhold an amount from the contract price to remit directly to the ATO on or before settlement.
The relevant legislation defines:
(a) new residential premises as meaning residential premises that have:
– not previously been sold as residential premises (other than commercial residential premises);
– have been built, or contain a building that has been built, to replace demolished premises on the same land;
– but does not include residential premises that have been created through substantial renovations of an existing building.
(b) Potential residential land as meaning land included in a property subdivision plan and which is permitted to be used for residential purposes (but does not yet contain any buildings that are residential premises) and does not contain any buildings that are residential premises) and does not contained any building that is in use for a commercial purpose – but only where the recipient is not registered or does not acquire the property for a creditable purpose, and does not apply to business to business transactions in respect of potential residential land.
The regime applies to sale contracts entered on or after 1 July 2018.
How will the GST regime affect buyers and sellers (and their agents)?
Sellers (and especially developers) need to consider their obligations to provide relevant and timely notifications about the nature of the residential premises/land. They may want to consider the benefit of applying to the ATO for a private ruling about the matter, and should do so as soon as practicable.
Buyers (and their professional advisers) need to be aware of their obligations to withhold and remit.
How can QConvey assist
QConvey is able to assist buyers and sellers of residential property with all of their conveyancing needs, including their obligations under the various withholding rules.
As a specialist conveyancer, QConvey can provide fixed fee, cost effective services, and as a member of the Ballantyne Law Group, has the resources and experience to deal with more complex taxation, structuring and contractual issues.
Please contact our team today to discuss any queries or concerns you have about this or any other conveyancing matter.