By Fred Haggar
Property Search 4U
If you are selling residential property and propose to enter into a contract on or after 1 July 2018, there are two things you need to consider:
1. Are you registered or required to be registered for GST?
2. Are you selling a new residential property or a substantially renovated property?
The new GST withholding regime now insists that the purchaser must deduct a GST withholding payment from the sale proceeds and remit those funds to the ATO on settlement.
If this applies, it will have a significant impact on the cashflow from the sale and the funds available to repay any mortgage on settlement.
The GST withholding amount will be:
1. 7% of the purchase price (if the margin scheme is adopted); or
2. 10% of the purchase price (if the margin scheme is not adopted).
Upon lodgement of your next BAS following the settlement, the amount of the GST withholding payment which has been remitted to the ATO will be credited against the GST which you are required to pay. All vendors who are registered (or required to be registered) for GST must, either in the contract or 14 days after the date of the contract, provide the purchaser with a specific written notice regarding the GST status of the transaction – whether or not the withholding regime applies. Failure to provide the required form of notice to the buyer may incur a penalty up to $21,000.
The GST withholding regime applies to contracts dated on or after 1 July 2018. However, contracts which are dated prior to 1 July 2018 but which settle after 1 July 2020, are also caught by the regime.