RSM Australia

GST on residential premises - legislation delayed

The Bill containing the legislation dealing with GST on property transactions will not be introduced into parliament until the autumn parliamentary sittings at the earliest, but it is our understanding that there is no change to the commencement date for the new regime, which remains 1 July 2018.GST on property transactions

While the delay in Tax Bills is not uncommon, this one in particular is of concern to a significant part of the community.

The proposed changes

From 1 July 2018, the Government will require purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the Australian Taxation Office (ATO) as part of settlement. GST to be withheld by the purchaser will be 1/11th of the total price, even where the margin scheme is to be used in calculating GST. This will lead to cash flow issues for developers and builders, and harsh penalties for purchasers who do not comply.

Under the proposed new rules, a supplier (including developers) will be prohibited from making a taxable supply of "residential premises" or "potential residential land" unless, at last 14 days before making the supply, they give to the customer a written notice including:

  • Whether the other entity will be required to make a payment under the amendments in relation to the supply.
  • If so, the amount required to be paid and when the amount is required to be paid.

Importantly, a notice will need to be given each time residential premises are supplied as a taxable supply.

Implications for us all!

These proposed changes are a quantum change in which the GST operates. They will place burdens on ordinary people not otherwise part of the GST reporting system, and levy harsh penalties for non-compliance.

Given the short turnaround time for everybody to get familiar with these new concepts, a start date of 1 July 2018 is unrealistic and unfair. Moves are underway to delay the commencement date, but we have had no word from government at this stage.

We will keep you updated on the progress of the legislation.

If you require further advice on property transactions, please contact your local RSM office.