Ready or Not...
AS IF YOU DON’T HAVE ENOUGH TO THINK ABOUT WHEN BUYING A NEW HOME!
I can understand how this has come about. Underhanded developers swiftly wind up the vendor development company to avoid paying GST on sales involving new residential land or potential residential land subdivisions. It's called phoenixing.
The unfortunate result of phoenixing is lost revenue for the ATO.
To stamp out phoenix operators, new laws have been introduced to require purchasers to withhold GST on contracts for sale of land relating to new residential property.
The new laws relate to GST on sales of "new residential premises" and "potential residential land" (subdivided residential lots) as defined in A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act). Commercial property and new premises created through substantial renovation will be exempt.
Generally, the GST Act now provides that purchasers of new residential land under contracts entered into after 1 July 2018 will be required to withhold and remit to the ATO 1/11th of the contracted purchase price (excluding adjustments) on or before completion of the contract. Where the margin scheme applies, the amount to be withheld and remitted will be 7% of the contracted purchase price.
The further attendances required by a lawyer to comply with these requirements on behalf of their clients will increase the costs of a conveyance for clients.
The new requirements will catch off-the-plan residential contracts which complete after 1 July 2020, even where the contract is exchanged before 1 July 2018. However, if the contract is exchanged before 1 July 2018 and the purchase price is paid before 1 July 2020, there is a 2-year transition period which exempts those contracts from the GST withholding requirements.
Both vendors and purchasers could face significant penalties for failing to comply with their obligations in relation to GST withholding.
Brown Wright Stein have a team of highly experienced property lawyers and conveyancers. If you need advice with any contract or would like to understand more about e conveyancing please contact us.