How the GST changes affect property developers and purchasers

6 May 2019

In a previous post we have looked at the raft of legislative changes that have been introduced or proposed that will expand the Australian Taxation Office’s (ATO) ability to combat illegal activity.

One of the aims of this boost in powers is to target rogue property developers who claim GST on construction costs, then place the company into liquidation to avoid paying the GST collected on the property sale to the ATO.

If you or your clients operate in this sector, you need to be aware of the amendments to the GST laws which took effect on 1 July 2018.

Why the change?

Previously, some unscrupulous property developers were collecting GST from property sales from the purchaser, but failing to pay it to the ATO and subsequently winding up their companies.

New requirements

From 1 July 2018, the ATO has changed the way they collect GST from the sale of new residential premises or potential residential land.

Rather than the purchaser giving the developer the full purchase amount, the purchaser is now required to withhold 10% of the contract price (the GST component) and pay this directly to the ATO.  

To provide certainty for contracts that have already been signed, a transitional arrangement excludes contracts entered into before 1 July 2018 where any consideration for the supply (other than a deposit) is provided before 1 July 2020.

Action

If you are your clients are planning to sell vacant land or newly constructed residential premises, you need to be aware of this new obligation.

If your clients are experiencing cash flow difficulties or have accrued tax debts that cannot be met, call Rodgers Reidy for a free confidential discussion.

Contact our team

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