GST Withholding and What Does it Mean For You?

by Melitta Hill

Do you have a GST Withholding obligation?

As of the 1st July 2018, certain Purchasers of new residential premises and ‘potential residential land’ are required to withhold an amount from the purchase price of a property to pay to the ATO for GST on behalf of the Vendor.

So the tax is the Vendor’s tax, but the Purchaser has the obligation to without money at settlement and pay it directly to the ATO instead of the Vendor.

GST withholding

How does GST Withholding affect you?

As a Purchaser, it doesn’t, although it is the Purchaser’s responsibility to withhold that amount from the Vendor. This will be handled by your Conveyancer.

As a Vendor, this will generally only apply if you are a builder or developer. You need to be making money, in a business sense, from the property you are selling.

The amount withheld from you under the Contract will be either 7% of the sale price (if the margin scheme has been applied), or 1/11th of the sale price.  The amount withheld will be paid to the ATO at settlement and added as a GST credit.  This will be then be taken into consideration and calculated accordingly when the Vendor (developer) lodges their BAS Statement.

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This new legislation does not affect the sale of existing residential properties or the sale of new or existing commercial properties.