Government turns GST on its head for new property sales
The Budget measures include a radical plan to shift the responsibility of accounting for GST from property developers to purchasers. Under the proposal, purchasers must remit the GST directly to the Australian Taxation Office (ATO) as part of the settlement process.
The proposal will apply to newly constructed residential properties and new subdivisions from 1 July 2018.
What does this mean for the developers?
The full impact fordevelopers will depend on the final form of the legislation. The critical question is whether the purchaser’s liability will be interim or final.
If the purchaser’s liability to account for GST is non-final, the purchaser may be required to collect a notional amount and a true-up may then occur when the property developer submits its business activity statement (BAS). This may present cash-flow and funding issues for developers, particularly if the GST amount remitted by the purchaser is significantly more than the developer’s actual GST liability.