What is the gst withholding tax?

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 Purchasers are required to withhold the GST and remit it to the commissioner on the purchase of new residential premises 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.

The Vendor must notify the Purchaser whether or not they are required to withhold an amount on settlement. This is done by completing a GST Withholding Notice. A GST Withholding Notice will advise the Purchaser of whether it needs 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.

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 failing to withhold is an administrative penalty equal to the amount that was required to be withheld.

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