It was announced as part of the 2017 Federal Budget that from 1 July 2018, purchasers of “newly constructed residential premises” or “new land subdivisions” will be required to remit GST directly to the Australian Taxation Office as part of settlement. Details have not yet been provided on how this measure will be implemented or operate.
Under this measure, it is expected that vendors will be required to disclose GST liabilities as a separate amount prior to settlement of sales of new residential properties or land in new subdivisions.
Ordinarily, vendors of newly constructed residential premises or new subdivisions will remit GST upon lodgement of a business activity statement. The new measure will be particularly problematic for vendors applying the margin scheme to their sales, as in some circumstances vendors may not have calculated the quantum of GST until after settlement.
In some cases, vendors use the delay between settlement dates and GST remission to offset borrowing liabilities (or even to cashflow costs). Clearly that will no longer be possible.
Moreover, the shift in the GST remission burden to purchasers may be problematic for those purchasers who are not registered for GST and who may be unable to determine whether a property constitutes a “new residential premises” or to verify the GST liability where the margin scheme has been applied.
To discuss this further or for more information please contact: