New Changes For GST On Residential Property – How It Could Affect You?
Tax Planning & Compliance
25 November 2020

A New Regime

  • On 9 May 2017 the Government announced that it will strengthen compliance with the GST law by requiring purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the ATO as part of settlement.
  • Under the current law (where the GST is included in the purchase price and the developer remits the GST to the ATO), some developers are failing to remit the GST to the ATO despite having claimed GST credits on their construction costs. As most purchasers use conveyancing services to complete their purchase, they should experience minimal impact from these changes.

Main Features of the Bill for GST on Residential Property

Transactions affected

  • On 7 November 2017 the Government announced that it will introduce a transitional arrangement to the 2017-18 Budget measure. This two-year transitional arrangement will exclude from the Budget measure contracts signed before 1 July 2018 as long as the transaction settles before 1 July 2020. This will provide certainty for contracts that have already been signed.
  • The new regime does not apply to sales of new residential premises created by substantial renovation and commercial residential premises.

Purchaser’s GST withholding obligations

  • Purchasers must withhold and remit to the ATO either before or immediately following settlement:
    • 1/11th of the purchase price (if the margin scheme is not applied); or
    • 7% of the purchase price where the margin scheme applies.
  • The actual contract price, not the adjusted purchase price must be used for the purpose of calculating the amount withheld and remitted.
  • The payment of a deposit does not trigger a payment obligation for the purchaser.

Vendor’s obligations 

Before settlement occurs, vendors must issue purchasers with a notice setting out the prescribed information, including the amount of GST that should be withheld and remitted by the purchaser.  Failure on the part of the vendor to comply may result in significant penalties being imposed.

If you would like additional information on this article, please contact Fred Pane at our office on (03) 9377 4400 or email

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