If you are selling or buying new residential premises or potential residential land, you may need to pay GST at settlement. The way GST is paid for certain property transactions affects purchasers, suppliers and their representatives.

From 1 July 2018, at settlement most purchasers pay both:

•   the withheld amount of GST direct to Australian Tax Office (ATO);

•   the balance of the sale price of the property, minus the withholding amount, to the supplier.

This applies to both:

•   new residential premises;

•   land that could be used to build new residential property – potential residential land.

If you are purchasing property

If you're purchasing a property, ensure you have a written notification advising whether or not you have a withholding obligation on the property.

Withholding obligation

If you have a withholding obligation, you must:

•   have a written notification from the supplier stating if the sale is subject to GST

•   lodge Form one: GST property settlement withholding notification

•   lodge Form two: GST property settlement date confirmation

•   pay the withheld amount to ATO (to the nearest dollar).

You don't need to register for GST just because you have a withholding obligation.

Using a representative

If you authorise a representative to lodge the forms on your behalf, such as tax agent, you're required to provide a signed declaration.

Note: Conveyancers can't provide GST advice unless they're a registered tax or BAS agent.

Withholding amount

The amount a purchaser must withhold (rounded down to the nearest dollar) is generally either:

•   1/11th of the contract price (for taxable supplies)

•   7% of the contract price (for margin scheme supplies)

•   10% of the GST exclusive market value of the supply for supplies between associates (for consideration less than GST-inclusive market value).

If you are selling property

If you're selling residential premises or potential residential land you must:

•   notify the purchaser in writing (supplier notification)

•   advise whether they need to pay a withholding amount from the contract price for the property or not

•   state the withholding amount.

This can be included in the sales contract or in a separate document prior to settlement. Most states have updated their standard contracts to include this information.

If you have made a mistake on the notification, you must provide the purchaser with an amended one.

You may incur penalties if you fail to provide the required notice.

The purchaser pays the withholding amount directly to ATO at the time of settlement – instead of to seller.

Reporting obligations

The standard elements of selling a property and reporting the GST on your sales apply.

On your business activity statement (BAS) you must report:

•   all property sales at label G1;

•   GST on sales at label 1A.

You receive a credit in your GST property credits account. This is the withheld amount paid by the purchaser. If there are multiple suppliers in the property transaction, it is your portion of the withheld amount.

This credit is transferred from the GST property credits account into your activity statement account when you lodge your activity statement for the relevant period.

If you're unsure of the correct GST treatment of the supply, we recommend you seek advice from us or your tax professional.

Conveyancers and real estate agents can assist purchasers to complete the forms. However, they can't provide GST advice unless they're registered tax or BAS agents.

These regulations are quite complicated depends on your situation; you might do not need to withhold  GST at settlement. We strongly suggest you seek professional advice before undertaking any sales contract.

Chang Accounting Advisory Pty Ltd, we are CPA practice and tax agent. If you or your families or friends need our services, please feel free to contact our team for any assistance. 

This article is for informational purposes only and does not form part of our advice. This article is based on Australian Taxation Office (ATO) and Tax Practitioners Board. Please contact our team if you need any assistance.

Claire Chang, 0497 131 419, claire.chang@changadvisory.com.au, WeChat: clairechang26

Michelle Cui, 0433 539 870, michelle.cui@changadvisory.com.au, WeChat: michellejc