House rules have changed | Talking Tax

TAX MOVES: Tax specialist Marcus Davis says that from July 1, people buying a new house will need to withhold an amount from the contract price and remit it directly to the ATO on or before settlement.
TAX MOVES: Tax specialist Marcus Davis says that from July 1, people buying a new house will need to withhold an amount from the contract price and remit it directly to the ATO on or before settlement.

My wife and I are looking to build a house next year. I’ve heard there’s been recent changes to how GST applies to these types of contracts, is this true?

Yes, new measures have been introduced in relation to GST on the purchase of a new residential house, or land to be used to build a new residential house.

Currently, property developers need to remit GST collected on taxable sales of new residential houses or the subdivision of potential residential land.

Under the new measures, the obligation to remit GST in relation to new residential houses will fall onto the purchaser. Effectively, this will mean you will need to withhold an amount from the contract price and remit it directly to the ATO on or before settlement.

The change applies to the purchase of eligible property for which any payment (excluding deposits) is first made on or after July 1 (irrespective of the contract or settlement date). Additionally, the measures will also apply to contracts signed before July 1, 2018 where payment will first be provided after July 1, 2020. Eligible properties subject to the new rules include the sale of new residential properties and the sale of potential residential land included in a property sub-division plan, such as land forming part of a house and land package.

Generally, “new residential premises” are residential houses that have not previously been sold, have been created through substantial renovations of a building, or have been built to replace an old house that has been demolished.

Prior to settlement, you will be provided with a written notice from the seller, with details of whether GST will apply and if so, the amount and timing of the payment. You must pay the withheld amount either directly to the ATO, or give the seller a bank cheque made out to the ATO. Provided you keep a record of the payment, no penalties should apply to you for any delay in the ATO receiving the payment.

Any information in this article has been prepared without taking into account your personal circumstances. You should seek professional advice before acting. While reasonable care is taken in the preparation of this information to the extent allowed by legislation, Crowe Horwath (Aust) Pty Ltd ABN 84 006 466 351, accepts no liability whatsoever for reliance on it.

You will need to withhold an amount from the contract price and remit it directly to the ATO.