The Treasury Laws Amendment (2018 Measures No.1) Bill is due to commence on 1 July 2018 which provides Purchasers of new residential premises or long term Leases of those premises from Developers will be required to deduct GST from the settlement monies when settling the purchase and forward the GST amount to the Australian Taxation Office (ATO).
If the Margin Scheme is not used by the vendor Developer, 1/11th of the Contract price or the price of the supply is required to be sent to the ATO. If the Margin Scheme is used by the Vendor Developer then 7% of the Contract price or supply price will be required to be sent to the ATO unless the Minister administering the Act determines a percentage between 7% to 9%.
If there is a sale to an associate of an owner Developer without consideration or for consideration that is less than the “GST inclusive Market Value”, the amount to be paid to the ATO is an amount equal to 10 percent of the “GST inclusive Market Value”.
A vendor Developer must not make a supply by way of sale or long term Lease of residential premises or potential residential land unless when making a supply, they have given to the other entity a written notice setting out particulars which are detailed in the GST Act.
The notice disclosure must be included in the Contract for Sale or long term Lease.
For Contracts entered into prior to 1 July 2018 these provisions do not apply until 1 July 2020, but for Contracts entered into after 1 July 2018 these provisions apply and effectively mean that buyers of new homes are to pay GST to the ATO.
Should you have any queries regarding the circumstances of these new laws do not hesitate to contact Julian Peters of Russell Kennedy.