The Tax Office is changing the way they collect goods and services tax (GST) on some property transactions during the settlement process.

From 1 July 2018, buyers who purchase new residential premises or potential residential land need to withhold an amount from the purchase price and pay it directly to the ATO on or before settlement.

There are transitional rules that apply to some contracts.

How the change may affect you…

If you are a property developer, you will need to let the buyer know when your business sells residential premises or potential residential land as the buyer needs to withhold an amount. Your business can include this information in the sale contract or in a separate document.

If the buyer needs to withhold an amount, your business must also include the details listed below:
› Your business name and Australian Business Number
› the amount the buyer needs to withhold and pay to the ATO
› when the buyer needs to make the payment
› if the purchase includes a non-cash payment (such as land swaps), the GST-inclusive market value of that part of the payment
› other information as stated in the regulations.

Your business doesn’t need to tell the buyer if your business is selling:
› commercial residential premises
› potential residential land where the buyer is a GST – registered business purchasing the property for a creditable purpose.

Once the buyer has paid the amount, the ATO will make a credit available to your business in a GST property credit account and send you an email to confirm this. The ATO will apply this credit against their activity statement account once your business lodges the business activity statement (BAS).

There are no changes to the GST rate or the way your business lodges the BAS.