Do You Know the Impact of GST on Residential Property?

A Vendor may have a withholding obligation and be required to pay GST on their sale if:

  1. They are registered for GST;
  2. The property is a New Residential property; or
  3. Potential Residential Vacant Land

The GST of 12.5%  is withheld from the sale price by the purchaser, and paid to the Australian Taxation Office with the balance of the sale proceeds going to the Vendor except if certain requirements are met.

There are different obligations depending on whether you are buying or selling.

The Vendors Representative will provide the other side with a ‘GST Withholding – Supplier Notice’ which will have all the relevant information if the Vendor is unsure get them to seek advice from their accountant.

If the Vendor fails to give notice, a fine of $21,000 is given plus an administrative penalty may also be applied.

The Purchaser’s Representative will need to complete Forms 1 and 2 via the ATO website.

Form 1 – ‘GST property settlement withholding notification’
This is completed once you have an unconditional Contract of Sale and can be done via the ATO website. Once completed you will receive a notice which is to be forwarded to the Vendors Representative.

Form 2 – ‘GST property settlement date confirmation’
This can only be completed 2 days prior to settlement via the ATO website. Once completed you will receive a notice which is forwarded to the Vendors Representative, and this will have the payment details of where the withheld GST is to be directed at settlement.

If the Purchaser fails to withhold the GST, an administrative penalty equal to the withholding amount is given.

If you require assistance with buying or selling a property, or not sure if GST applies, contact us today!