Property Development – New GST measures for Property Developers
In the most recent Budget of 2017, the government had announced that from 1 July 2018, purchasers of newly constructed residential properties or land in new subdivisions will have to pay GST directly to the ATO as part of the settlement. The changes were announced to ensure that property developers comply with the GST law and to eliminate ‘Phoenix operators’.
A property developer is defined as an individual or company, who derives income by building or renovation properties and selling it at a profit.
The property developers lodge their business activity statements and claim the GST on their expenses throughout the different stages of the development process, from the earlier stage of acquisition, to the planning and construction stage up until the disposal of the property in which they are then required to pay GST when they make a profit. These earlier stages of claiming GST during the construction phase generally leads to a refund for the developer as no income is earned until it is sold. However many developers are failing to do this and do not meet their tax obligations.
In order to ensure that GST is paid to the ATO following the completion and sale of their property, the changes in the budget, mean that it will require purchasers to pay GST directly to the ATO for any property that is settled on or after 1 July 2020 regardless of the date of contract. If the contract to purchase the new property was before 1st of July 2018 with a deposit being put down before 1 July 2020, the legislation will not apply to them.
This new system seems to be similar to the CGT Tax withholding obligations for Non-Resident sellers of investment properties.
If you are a property developer who requires an accountant to prepare your business activity statements, tax return or if you are a purchaser wanting to know more in regards to this and how it may affect you, give us a call today on 03 8609 1889 or email us on info@a1accountants.com.au and one of our friendly staff will be able to assist you with your queries.
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Property Development – New GST measures for Property Developers
