GST Withholding Bill – new residential properties and subdivisions – expected 1 July 2018

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The GST on property transactions measure has been introduced, as schedule 5 to the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018.
To recap:
The Government will strengthen compliance with the Goods & Service Tax (GST) law by requiring purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the Australian Taxation Office (ATO) as part of settlement. The measure will require the purchaser of newly constructed residential properties of new subdivisions to remit the GST on the purchase price directly to the ATO as part of Settlement for contracts on or after July 1, 2018.
You can access the legislation as introduced along with the explanatory materials by following this link HERE.

Debate and passage is likely to occur within the current Autumn Sittings, which would allow for legislation to be in place before the 1 July 2018.
The AICWA is mindful that time is fast approaching to deliver much needed training. Until greater certainty of what is being proposed is known AICWA will continue to provide updates where appropriate and look to assist with  the delivery of info sessions in the near future.
AIC National via its representation on the ECG is working with various key stakeholders to raise awareness of the following concerning issues:

  1. There appears to be no provision to protect the rights of the secured creditor.
  2. May significantly disrupt the market, in particular for first home buyers.
  3. Impost on the consumer.
  4. Potential to increase the cost of new housing and vacant land.
  5. Impost on small business.
  6. Impost on developer projects.
  7. Impact on developer lending.
  8. Poor consultation process with the limited circulation of information and embargoed meetings.
  9. Will affect the practitioner’s day to day process and increase the time allocation for a conveyancing transaction.
  10. The payment process if not through PEXA is flawed with cheques handed over to a developer at settlement for payment to the Commissioner.
  11. Purchaser not in the clear if accepts the detail in the notification from the developer if they knew otherwise.

The ECG has also requested an extension to address the ATO forms as these also are unworkable, cumbersome and yet another avenue for data matching and information gathering not necessarily required for the process of remitting a payment.  Of particular concern to conveyancers, is how the Tax Practitioners Board will view the required content in relation to the Tax Agent Services Act.
From Treasury:
A number of changes have been made as a response to the consultations, including:

  • Substantially renovated premises: Removing substantially renovated premises from the withholding requirement to simplify matters for conveyancers and purchases.
  • Price: Clarifying that the amount to be paid is 1/11th of the contract price to simplify matters for vendors and purchasers.
  • Removing the 5-day notice requirement on purchasers to further simplify compliance for purchasers.
  • Notice: Removing the 14-day notice requirement for vendors to provide further flexibility for industry.
  • Removing criminal penalties on purchasers.
  • Reliance on Notice: Allowing purchasers to rely on a vendors notice, unless it is unreasonable to do so (eg that its an off-the-plan apartment that they know is new).
  • No notice: While updated standard contacts will ensure that a notice is provided, to avoid doubt, where no notice is provided the purchaser can withhold without incurring any penalty. If the withholding is done in error, the ATO will refund the developer.
  • Deeming payment: Where purchasers provide a bank cheque to the vendor at settlement made out to the ATO and their conveyancer retains a record of this, no penalties will apply for any delays in the ATO receiving payment. This ensures that if the supplier does not provide the bank cheque to the Commissioner by the required time that the purchaser does not face a penalty. This is intended to provide certainty to purchasers that these types of arrangements will not expose them to penalties, which should minimise disruption to the usual settlement process
  • Transition: Introducing a 2-year transitional arrangement to ensure that existing contracts are not affected, subject to settling by 1 July 2020.
  • Multiple supplies: allowing for withholding to apply to a reduced amount where it is possible to ascertain the price of the supply to which the withholding applies.
  • Margin scheme: introducing a lower 7 per cent rate of withholding where the margin scheme applies, and removing the rapid refund option.
  • PDAs: Introducing a deeming provision to address issues arising from existing Property Development Agreements.

Source: 8th February AICWA e-Bulletin “GST Withholding Bill”

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