Attention Property Developers!
The federal government budget will introduce a proposed change whereby the responsibility for remitting GST on the sale of new residential premises will shift from property developers to purchasers.
As the law currently stands, developers collect GST from the purchasers as part of the buying price and then send it to the ATO. As of the 1st of July 2018, the proposed change will be enforced, which will see the purchaser of the premises, pay the GST component directly to the ATO. The Government has raised concerns that there is a risk to its GST revenue as developers are claiming input tax credits during the time of the project, but once the project is complete the developer goes into liquidation, leaving the ATO with unpaid GST liabilities.
This proposed change is an effort made by the ATO to strengthen their compliance as they wish to ensure that developers are paying the GST component on the sale of the new residential premises. After the implementation of this change the government expects to increase their GST revenue by $660 Million over the next four years.
Breakdown of the new law:
The proposed changes will affect new residential premises and potential residential land.
Changes for purchasers as of 1st of July 2018:
- Purchasers will have to pay the GST component directly to the ATO the day before or on the day of when the premises is settled.
Changes for developers as of 1st of July 2018:
- When completing the BAS, developers will be obligated to report the GST component and they will receive a credit from the ATO for the amount paid by the purchaser.
- Developers are obliged to issue a withhold notice 14 days before the settlement. Failure to do so will result in penalties being issued.
New to RDV Business Solutions?
Get your free 1-hour consultation now