In this newsletter, we focus on the introduction of the new GST Withholding Regime.
The Government has lost $1.8 billion in GST revenue between 2012-2017 from phoenixing. This occurs when developers complete and convey residential developments and then declare the company insolvent without remitting the required GST from their sales.
To combat this practice, the Government has introduced a GST Withholding Regime which comes into effect on 1 July 2018. The changes will affect both buyers and sellers of “new residential premises” eg. new residential vacant land, newly constructed units/townhouses or newly constructed house and land packages.
What must the Buyer’s conveyancer do?
As part of the conveyance, the Buyer must withhold the GST, by either:-
- paying the GST amount to the ATO on or before settlement, or
- providing a bank cheque drawn to the ATO to the Seller on settlement.
What must the Seller’s conveyancer do?
The Seller must provide notice to the Buyer if the property being sold is captured by the GST Withholding Regime. It is an offence not to provide the relevant notice.
The GST Withholding Regime will apply to all contracts entered into on or after 1 July 2018.
Contracts entered into prior to 1 July 2018 which do not settle until on or after 1 July 2020 are also captured by the new provisions.
The ATO has created a short video which explains the upcoming changes.
We will provide further updates to you when they become available. Our conveyancing solicitors anticipate that changes to the standard REIQ contract will be necessary. In addition, an approved Form may become available for use by sellers in complying with their notice obligations.