Overview of the GST
The Goods and Services Tax (GST), effective from 1 July 2000, applies to certain types of property transactions. However, generally, GST does not apply to existing residential land sales and purchases.
The residential properties that can attract GST are those properties that:
- have not previously been sold as residential premises;
- have been created by a substantial renovation of a building; or
- have been built to replace demolished premises on the same site.
If you have an issue with the GST (and this area can be very complex where property is concerned) it is strongly recommended that you obtain professional advice from your accountant.
GST withholding regime
Since 1 July 2018, if GST applies to the sale of a residential property (usually because it is new or vacant land), the buyer may be required to withhold the GST and pay it to the Australian Taxation Office (ATO) at settlement. A vendor’s solicitor or conveyancer must advise a buyer if they are required to withhold GST (and the vendor’s conveyancer will usually ask the vendor’s accountant to confirm this advice if the property is not an existing residential property).
A buyer can be penalised for not withholding GST. As it is the buyer’s obligation to remit GST directly to the ATO, if there is any doubt in the buyer’s conveyancer’s mind about whether GST should be withheld at settlement, the conveyancer should apply to the Commissioner for a private ruling.