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Treasury Laws Amendment Act – GST Withholding Obligation for New Residential

Wednesday, July 25, 2018


The Federal Government has enacted legislation in an attempt to tackle phoenixing; a practice whereby property developers wind up their companies prior to their next business activity statement (“BAS”), thus avoiding payment of GST on property sales. From July 1 2018, purchasers of “new residential premises” and certain subdivisions of “potential residential land” are now required to withhold one eleventh of the sale price (or 7% where the margin scheme applies) from the vendor and remit this directly to the ATO. The remittance must occur on or before the date of settlement. Developers selling the land will be required to give written notice to the purchaser as to whether or not this requirement applies prior to each sale contract, or else face administrative penalties of up to $105,000. Purchasers will face administrative penalties equivalent to the amount required to be withheld if they fail to remit the GST to the ATO.



Developers who enter instalment contracts (sale contracts where payments are made progressively through instalments) may need to consider how they structure their transactions, as the withheld amount may greatly reduce the first instalment, directly affecting cash flow. In all residential off the plan residential purchases, vendors and purchasers alike must be vigilant in adhering to the new requirements to ensure they avoid the costly administrative penalties.



New contract sections


If there is no GST component of the sale tick “no”.  If the buyer is not registered for GST tick “no”.  Only tick “yes” if both of these things are true. 


If you ticked “no” to the first question, tick the first box below.  If you ticked “yes” to question one, tick the second box. 



If in doubt:  Have the Seller take legal advice. 




For any questions or comments, please contact us today. 


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