property development
Here are the top three questions we get asked by clients when it comes to GST and property.
1. Is GST payable when I purchase a home?
Generally, GST is not payable on the sale or purchase of an existing residential property. A residential property includes:
- Houses;
- Units;
- Flats; and
- Townhouses.
However, GST may be payable if the property is:
- A new residential property (i.e. a property that has been newly constructed and never been lived in);
- Potential residential land (i.e. land that in future will be developed into a residential property);
- A commercial property; or
- Vacant land.
The status of the Vendor always needs to be considered in determining whether GST is payable and in particular whether they are registered or required to be registered for GST purposes.
A contract of sale should outline whether GST is payable. Therefore, careful consideration should be made to the particulars of sale.
2. When am I required to withhold GST?
From 1 July 2018, the new GST withholding regime requires purchasers of new residential premises or potential residential land to withhold 1/11th (or 7% if the margin scheme is applied) of the unadjusted, GST inclusive contract price to the Australian Taxation Office (ATO) at settlement.
Please click here for definitions of new residential premises or potential residential land.
A vendor must provide a purchaser with notice in writing stating whether the purchaser will need to pay a withholding amount or not. They also must advise the purchaser what the withholding amount is.
There are penalties associated with failure to provide the required notice and failure of the purchaser to make payment of the GST withholding if notice has been given.
Once notice is provided, your solicitor/conveyancer will attend to paying the withholding amount directly to the ATO at settlement.
3. What is a sale of going concern?
The going concern principal is the assumption that a business will continue to exist once a property has been sold.
A sale of a going concern is GST-free if, in general, all of the following apply:
- the sale is for payment;
- the purchaser is registered, or required to be registered, for GST;
- the purchaser and seller have agreed in writing that the sale is of a going concern;
- The sale includes everything that is necessary for the continued operation of the business; and
- The business is carried on by you until the settlement date.
If any of the above criteria is not applicable to the sale, then the sale will revert to a plus GST sale.
Need a bit more info? Please do not hesitate to contact Sophie Chessells or a member of our highly qualified Property Law Team.