In 2018 the ATO introduced legislation around GST payments at settlement. Now, the GST component of certain property sales becomes payable directly to the ATO by the Purchaser at the time of settlement, instead of by the supplier (or in the terms of a Contract, the Vendor).
Huh? What?
Basically, prior to 1 July 2018, anyone buying a property paid GST on the purchase, along with the sale price, all to the Vendor. The Vendor then passed it on to the ATO at the time of completing their quarterly BAS. But now, the Vendor still receives the sale price, but less the amount of the GST, which the Purchaser now sends straight to the ATO. Effectively this means that the middle-man (the Vendor) has now been removed from the process and the ATO receives their GST payments at settlement.
Why? What was the point in changing it?
Well, the official line is that it was changed to “improve the integrity of the GST system for certain property transactions“, and it was announced back in the 2017/18 budget.
The more sceptical of us out there would probably suspect that the Government needs the money quicker, and has found a way to eliminate the wait to get it from the Vendor. And also to eliminate the Vendors who were finding ways around paying it back to the ATO.
Do these changes to GST payments at settlement effect me?
Maybe. It applies to GST for new residential premises or subdivisions of potential residential land, where the Vendor is a property developer or a GST registered entity and the contract has been entered into on, or after, 1 July 2018.
It won’t effect…
- Substantially renovated residential premises
- Commercial residential premises
- Commercial property
- ‘Old’ residential premises
- Certain business to business potential residential land transactions.
What else do I need to know about GST payments at settlement?
Probably not too much. There’s the usual paperwork involved, and administration stuff, but that’s what we’re here for. Chat to us and we can tell you as much or as little about it as you want to know.
The ATO receiving the GST is not a condition of settlement. It also doesn’t change the amount of GST the Vendor needs to pay.
There’s also some fines that apply to people who get the process wrong in certain ways, or neglect some of their responsibilities, but that’s what you’ve got a Conveyancer for.
There’s a tonne of info available on the ATO’s site … but don’t put yourself through it. They do have this informative video though.
We can also answer your queries without all the government jargon. Just drop us a line here.