New residential property is a popular investment for many, and can be especially so for self-managed superannuation funds, however the ATO is concerned that not every investor in residential property is fully aware that it is an option that may bring with it unexpected GST obligations.
The ATO says that from 1 July 2018, most purchasers must withhold an amount from the contract price at the date of settlement and pay it directly to the ATO. The sale price is paid to the property supplier. This applies to:
Purchasers who engage a representative when buying new residential property will need to complete a signed declaration so the representative can lodge two required forms and pay GST on behalf of the purchaser.
Purchasers who have a GST withholding obligation must complete and lodge two forms:
Ask us if you require these forms.
If there were any mistakes on Form two, the ATO should be contacted to have it cancelled before lodging a new form. If multiple properties are bought, lodging a new form for each property transaction will be required.
To complete Form one, the supplier (seller/vendor) needs to give the buyer a “supplier notification” so the purchaser knows whether or not there is a GST withholding obligation.
If there’s an obligation to withhold GST, the supplier notification must include:
A supplier’s written notice can be relied on:
However, if the purchaser or their representative knows that a supplier is registered for GST and selling new residential premises, the ATO considers it unreasonable not to withhold and pay an amount to it at settlement.
The ATO has stated that it won’t retrospectively penalise purchasers who acted reasonably if it’s later found that a supplier hasn’t met their obligations.