GST withholding: what you need to know: Settlement Industry Bulletin Issue 81
Changes have been applied by the Federal Government from 1 July 2018, regarding the liability for the goods and services tax (GST). Purchasers of new residential premises and new residential subdivisions, where the transaction is a taxable supply, are now required to withhold the GST component of the purchase price and pay that amount to the Australian Taxation Office (ATO). As a settlement agent, you may be required to arrange this on behalf of the purchaser.
Changes for the purchaser
The purchaser, being the recipient of the supply, must remit the GST to the ATO either prior to or at settlement. A summary of the changes for the purchaser are:
- They should obtain a written notification from the supplier
- They will need to withhold an amount from the total purchase price and pay the balance of the price to the supplier (for application transactions)
- They must pay the withholding amount directly to the ATO on or before settlement (for applicable transactions).
Settlement will not be conditional on payment of the withholding amount to the ATO by the purchaser. However, penalties can be applied to the purchaser if they fail to pay the withholding amount as required.
What if the purchaser does not get the required notification?
If when settling a residential transaction, the purchaser does not receive a contract with the required notification (such as the REIWA Annexure or any other such permissible notice), it is recommended that the vendor is advised of their notification and/or withholding obligations under the measure. A completed notice will need to be requested to be provided prior to settlement.
If the vendor fails to provide notice to the purchaser, the purchaser or agent may remit the GST to the ATO without incurring any penalty. Consider seeking legal advice in these instances to ensure compliance.
From 1 July 2018 all sellers of residential premises, new or otherwise, or potential residential land must include a supplier notification to the purchaser.
The notification should state whether there is a requirement for the purchaser to withhold GST from the purchase price and remit it to the ATO on behalf of the seller. There are some excluded supplies, see the ATO website for details.
Paying the withholding amount
Purchasers who are required to withhold part of the purchase price for payment to the ATO must submit the following online forms:
- Form One is the GST property settlement withholding notification
- Form Two is the GST property settlement date confirmation.
The GST withholding amount will generally need to be paid at settlement, or the day before. For more information on how to pay the GST withholding amount, see GST property settlement forms and instructions on the ATO website.
Who can complete the ATO forms?
A purchaser can authorise their settlement agent to submit the forms on their behalf by giving them a signed declaration.
The purchaser declaration must state:
- They have authorised you to lodge the document
- The information is true and correct
- They are aware that you are not a registered tax agent or Australian legal practitioner and you cannot provide tax agent or legal services.
If you offer this service to your purchasers, you are required to hold a signed written declaration from your client, prior to submitting the forms. The purchaser can choose to provide this declaration by email, fax or in paper form and must retain the declaration, or a copy, for up to five years. The ATO recommends the settlement agent also keeps a copy of the declaration, in case the ATO requests a copy at a later date.
Contracts that were signed before 1 July 2018 are excluded from the new withholding obligations as long as settlement takes place before 1 July 2020.
After 1 July 2020, the supplier must provide a notice to the purchaser and the purchasers must lodge the required forms and pay the notified amount to be withheld to the ATO.
Additional inforamtion is available on the ATO website at:
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