GST on property settlement of new residential premises

From 1 July 2018, purchasers of new residential premises or potential residential land may be required to withhold an amount for GST from the purchase price and remit this to the ATO.

The legislation received Royal assent on 29 March 2018 and intends to prevent property developers from undertaking illegal “Phoenixing” activity and avoid paying their GST obligations. 

The building company selling the residential property or “supplier” is required to provide purchasers with information to assist with compliance around this obligation.  This notification from the supplier must include:

  • Their ABN
  • The amount to be paid to the ATO
  • The date that the withholding is due to be paid to the ATO
  • The GST inclusive market value of the property
When the purchaser acquires a property they must complete the online “GST property settlement withholding” (form one) and the “GST property settlement date confirmation” (form two). 

Form one can be lodged any time after a contract has been entered into and prior to the date the withholding obligation would fall due, (usually settlement date).  If the contract is an instalment contract, the withholding payment is due on the date of the first instalment payment (separate to the deposit).  Upon lodgement of form one, the ATO will send an email to the purchaser confirming the unique payment reference number (PRN) and the lodgement reference number (LRN) to be included in form two.

Form two must be lodged once the withholding obligation is due and confirms the settlement date and requires the PRN and LRN supplied with the confirmation email sent upon lodgement of form one.
With a standard contract, the payment of the withheld amount is due to be paid to the ATO on the date of settlement.  Under instalment contracts, the payment of the withholding amount is due to the ATO on the date of the first instalment.