The Commonwealth Government has introduced a Bill into Parliament which will change GST arrangements for buyers of new residential premises.
It is expected that the new law will commence from 1 July, 2018.
The effect of the new law is that buyers of new residential premises will be required to collect and remit GST if it is applicable to the purchase.
The current arrangements are that the seller of the property is required to collect and remit GST to the Tax Office. This will soon all be a part of the property purchasing process for buyers.
The Tax Office has identified close to 4000 developers over the last 5 years who have engaged in activities to avoid paying GST. But here’s the rub – while the Tax Office can take action against sellers, they have determined that it would be too costly and time consuming to chase up the payments. So instead of doing their job properly, the easy answer is to flick pass the problem to buyers. What a novel approach to problems for business owners and others though unfortunately we don’t have the power to take the lazy way out like the Tax Office.
From July 1 as a buyer of new residential premises, you will need to make sure that you actually collect or arrange to collect the GST. If you engage a lawyer to act for you in the purchase then they will be alive to the requirement to collect the GST.
A few facts that have emerged:
- ‘new residential premises’ are defined as premises that have not previously been sold as residential premises and have been created through substantial renovation of a building or have been built to replace demolished premises on the land.
- the GST to be paid is a proportion of the ‘contract price’ not taking into account any adjustments that may occur in the settlement process.
- suppliers [read sellers] must give the buyers ‘accurate notice’ of their GST obligations. Failure to do so is an offence.
- the new law will not apply to contracts entered into before 1 July, 2018.