GST on Settlement Regime

 A new regime, “GST on settlement” commences on 1 July 2018, obliging buyers of certain residential land to withhold GST and remit it directly to the ATO.   

This regime requires purchasers of “new residential premises” or “potential residential land” to withhold an amount from the purchase price on account of the vendor’s GST liability and remit it directly to the ATO. The vendor is entitled to a credit for the amount paid to the ATO when the vendor’s net amount is assessed.

This measure is introduced to prevent developers dissolving their business before they become obliged their GST tax. Vendors must notify purchasers in writing before making the supply whether the purchaser is required to make a withholding payment. The ATO requires withholding purchasers to complete two on-line forms: “Withholding Notification Form” before settlement and  “Settlement Date Confirmation Form” on or before settlement. 

Not compliance with these provisions creates various offences by vendors and purchasers.