The government recently decided to make some revisions to the process of paying Goods and Services Tax (GST) when acquiring residential properties.
Although the amount of the tax remains the same, buyers of new homes after 1 July 2018 are expected to take care of remitting their GST payments to the Australian Tax Office (ATO).
The Property Council of Australia Chief Executive Ken Morrison said that this was one of the biggest modifications to the way GST is being collected on property since its introduction twenty years ago.
“Previously, this was done by the developer. The overwhelming majority did the right thing and passed the GST they collected through to the ATO, but this measure has been introduced to deal with the minority who didn’t, through so-called ‘phoenixing’,” shared Morrison.
Affecting 70,000 property transactions a year, the new directive will oblige homebuyers to do extra work in order to guarantee their property’s settlement. Some of these additional steps will include submitting forms to the ATO and separating the GST from the purchase price of the property.
“People buying property after 1 July should talk to their solicitor or settlement agent to ensure they have the right arrangements in place to meet this new requirement and ensure a smooth settlement process,” Morrison reminded those who wish to buy property.
Morrison added that The Property Council came prepared for the announcement as they had been investing in systems and staff training to aid the introduction of the new process and to minimise disruption or inconvenience to their customers.
For contracts entered before July 1, 2018, transitional agreements are already in place.