July 1 sees different GST rules for new residential property buyers
Buyers of new residential property after 1 July 2018 need to be aware they will be responsible for making sure the GST on their purchase is paid to the ATO as part of the purchase settlement process. The laws are aimed at reducing tax evasion in the property development sector, that require buyers to pay the GST at settlement.
The GST will not be an additional cost to buyers as it’s already part of any contracted purchase.
The chief executive of the Property Council of Australia, Ken Morrison, said this was one of the biggest changes to the way GST was collected on property since its introduction almost two decades ago.
“Under this change, buyers of new residential properties or subdivision of potential residential land will be responsible for remitting the GST amount to the ATO on or before settlement,” Mr Morrison said.
“Previously, this was done by the developer. The overwhelming majority did the right thing and passed the GST they collected through to the ATO, but this measure has been introduced to deal with the minority who didn’t through so-called 'phoenixing'.”
The new process will mean additional steps in the settlement process for residential property buyers, including submitting forms to the ATO and separating the GST from the purchase price of the property.
This could affect up to 70,000 property transactions a year.
“People buying property after 1 July should talk to their solicitor or settlement agent to ensure they have the right arrangements in place to meet this new requirement and ensure a smooth settlement process,” Mr Morrison said.
There are transitional arrangements in place for contracts entered into before 1 July 2018 and which settle before 1 July 2020.
Mr Morrison said Property Council members had been investing in systems and staff training to support the introduction of the new process and to mimimise disruption or inconvenience to their customers.
“We’ll closely monitor the implementation of the change and continue to consult with Government on issues that may arise during the transition.”
The change to GST payment is the biggest of a number of federal and state property- related changes that come into effect on 1 July.
Other measures include:
Federal
People aged 65 and over will be able to contribute $300,000 from the sale of their family home into superannuation
Queensland
Additional Foreign Acquirer Duty (residential) to increase from 3% to 7%.
New land tax category for holdings over $10m – 2.25% for individuals and 2.5%
for trusts, companies or absentee landholders.
Waste disposal levy $70 per tonne.
New South Wales
Local Infrastructure Levy caps will be increased in areas not funded by the Local Infrastructure Growth Scheme:
o $40,000 for greenfield areaso $30,000 for infill areas
From 1 July,
South Australia
ACT
eConveyancing will replace many of the paper and manual
processes traditionally involved in property transactions with secure online
processes. All standalone transfers and caveats must be lodged electronically
from this date.
Final phase of the full abolition of commercial stamp duty.
Off-the-plan stamp duty concession measure ends on 30 June 2018.
Stamp duty abolished for first home buyers who earn less than $160,000 for new or existing homes
Abolition of first home buyers grant