• Business

New residential premises – purchasers to pay GST

The Government has announced that from 1 July 2018, purchasers of newly constructed residential properties or new subdivisions are required to remit the GST payable directly to the ATO at settlement.

The Government has determined that developers are failing to remit GST on the sale of new residential premises. This is despite the developers claiming input tax credits for their construction costs.

The Government considers that most purchasers obtain professional conveyancing services and therefore the impact of this change on purchasers will be minimal. It is assumed GST will be remitted to the ATO in a similar manner to which transfer duty is provided to state revenue authorities.

BDO Comment

The Government has not provided any specifics on the implementation of this measure.

We eagerly await further detail on how this change will be administered. For the most part, the purchasers will not have the knowledge or information to determine the seller’s GST liability. In particular, purchasers cannot be expected to make an assessment on whether a property constitutes ‘new residential premises’, or to verify the GST liability in instances where the margin scheme has been applied.

The Government is unlikely to achieve its objectives unless the developer remains accountable for these GST decisions and the purchaser merely acts as a collection intermediary for the GST liability.

However, we note that the proposed commencement date of this measure allows the Government 12 months to address the above issues.