What is the gst withholding tax in covneyacing property purchases and sales?
The payment of GST on purchase of certain real property provisions of the Taxation Administration Act 1953 are in force from 1 July 2018 and apply to all transactions which settle after that date.
Essentially if you are buying a new house or property, you are required to withhold the GST and remit it to the Australian Taxation Office on the purchase of new residential premises that have not been sold before or potential residential land. The amount to be withheld is 1/11th of the purchase price, or if the margin scheme applies 7% of the purchase price. This is if the vendor does not provide you or your legal representative with a GST Withholding Notice. For more information on what properties are subject to this scheme, click here.
As a Vendor, you must notify the Purchaser or their legal representative, whether or not they are required to withhold the GST amount on settlement. This is done by completing a GST Withholding Notice. A GST Withholding Notice will advise the Purchaser of whether they need to withhold GST, and if so, the amount and means of payment.
Where a withholding obligation exists, the Purchaser must withhold the relevant amount at settlement and pay it to the ATO without delay. The Purchaser is required to complete a GST Property Settlement Withholding Notification Form prior to settlement at which time the Purchaser will receive a payment reference number, and a payment slip allowing payment to be made.
What are the penalties for failing to comply with your obligations as a Vendor or Purchaser?
The penalty for a Vendor failing to give notice is a fine of $21,000. An administrative penalty may also be imposed.
The penalty for a Purchaser for failing to withhold is an administrative penalty equal to the amount that was required to be withheld. In other words, if you do not withhold the GST amount from the Vendor at settlement, you as the Purchaser can be liable to pay the GST amount, even though this is not your debt!!
What can you do to ensure GST is dealt with correctly for your sale or purchase?
Engaging an experienced conveyancing lawyer to assist with your conveyancing ensures that your conveyancing process is undertaken accurately and correctly. We ensure the required GST notices are completed and sent to the purchaser if you are selling the property, or that the Vendor provides the GST withholding notice to us if you are buying the property. We ensure that if the seller does not provide a properly completed GST withholding notice, that the GST amount relevant to the sale is withheld so that you are not held personally liable.
If you need assistance with your conveyance, please contact our office.