A measure to prevent unscrupulous developers from exploiting GST is going to commence from 1 July 2018. People who buy new residential buildings or subdivisions of residential land must pay the GST of the purchase price to the ATO, at the latest, during settlement.
This change will not impact on the amount of GST paid, the sale of existing residential properties or for new or existing commercial properties.
When purchasing a property, buyers will need to, according to the ATO, separate the GST from the total purchase price, then pay just the GST to the ATO via a disbursement at the time of settlement, then the price minus the GST will be paid to the vendor.
This GST change was introduced as a means of targeting property developers who were exploiting the current system.
This change effectively allows the ATO to collect the GST earlier. Under the current system, the ATO relies on the business activity statement lodged by the developers which usually be the end of quarter. Some “dishonest developers” who phoenix their businesses, evades tax by creating a new business through the liquidation of an old one.
The new legislation will require property developers to be fully liable for GST, and they will need to give buyers written notification when they need to hold.
However, the ATO has stated that there will be no changes to how developers lodge business activity statement.