In the ever-changing tax landscape, a GST Bill currently before Parliament is bound to have significant ramifications for both purchasers and property developers. If the Bill passes in its current form, from 1 July 2018, purchasers of new residential premises or new residential subdivisions will need to remit the GST on the property’s purchase price directly to the ATO as part of the settlement process.
This is a significant change from the current arrangement where the developer collects the full proceeds and remits GST to the ATO in the next BAS (which can be up to three months after settlement). The reforms, which are intended to target developers who avoid remitting the GST by dissolving the business before the next BAS lodgement, will put a significant burden on purchasers.
For some developers there will be a significant cash flow impact because the purchaser will be required to pay 1/11th of the full sale price directly to the ATO, even if the developer’s GST liability on the sale would be less than this (e.g., where they can apply the GST margin scheme). In these cases, developers will need to seek a refund from the ATO.