Purchaser GST Withholding
Earlier this year legislative changes were implemented to require purchasers of new residential premises and new subdivisions of potential residential land to withhold the GST component of the purchase price and remit the GST directly to the Australian Tax Office (ATO).
With concerns of “phoenixing” by vendors, the ATO sought to shift the legal obligation to require purchasers to remit the GST to the ATO rather than vendors.
We have previously written about these changes. You can read our article detailing the changes here.
The changes came into effect on 1 July this year.
Vendors are now obligated to provide written notice to purchasers stating the amount of GST required to be paid by the purchaser at least two business days before settlement.
Notice will usually be served by the vendor either:
at the time the parties enter into the Contract for Sale – in accordance with the provisions contained in the Contract for Sale; or
via a separate notice provided to the purchaser not less than 2 days prior to settlement.
The notice must be served in accordance with the requirements under the Taxation Administration Act 1953, and must state:
whether the purchaser is required to pay GST in relation to the purchase; and
if the purchaser is required to pay GST in relation to the purchase:
the vendor’s name and ABN; and
the amount that the purchaser will be required to pay to the ATO; and
when the purchaser will be required to pay that amount; and
if some or all of the consideration for the property is not an amount of money, the GST inclusive market value must be included for the proportion of consideration that is not an amount of money.
The amount of GST the purchaser is required to withhold differs, for example:
if the margin scheme applies, the purchaser must withhold 7% of the contract price; or
if the margin scheme does not apply, the purchaser must withhold 1/11th of the contract price.
Various industry bodies that provide standard form Contracts for Sale have updated their residential contracts to deal with this legislative change.
The updated Law Society of South Australia Contract for the Sale and Purchase of Residential Land enables vendors to advise purchasers whether notice will be served at the time of entering into the Contract for Sale by ticking the appropriate box and filling out the relevant details in Item 17 of the Schedule (and complying with clause 64) of the standard terms of the Contract for Sale.
It is important that developers and agents ensure that they use updated industry standard form Contracts for Sale for all sales relating to new residential premises. Failure to do so may result in vendors breaching their obligations under the Taxation Administration Act 1953.
We recommend that, wherever possible, vendors serve a notice as part of the Contract for Sale. However, to cater for circumstances where this is not possible, we recommend vendors and agents prepare a standing template notice that complies with the requirements in section 14-225 of the Taxation Administration Act.
Regardless of whether Vendors seek to satisfy their obligations by serving the notice as part of the Contract for Sale or at a later date via a separate notice, it is important that vendors and agents ensure that all the requisite information as required under the Taxation Administration Act 1953 is included in any notices.
Failure by the vendor to give a notice is an offence with maximum penalties for individuals ($21,000) and companies ($105,000).
Cowell Clarke is able to assist with the preparing of a notice that complies with the legislative requirements.
Stamp Duty Concessions for “Qualifying Land”
As of 1 July 2018, purchasers are no longer required to pay stamp duty on “qualifying land”.
Qualifying land includes land used for commercial, industrial or recreational purposes as well as vacant land (in certain circumstances).
Land may also be qualifying land due to:
the intended future use of the land; or
zoning indicating that the land could be used for some other purpose other than residential or primary production.
In respect of any acquisition of vacant land where there is a future intended mixed use, developers may be eligible for a partial stamp duty exemption.
Applications can be made to Revenue SA for an exemption or rebate where only part of the land is qualifying.
Developers should also be aware that post- settlement, rebates may also be available if at the time of settlement a stamp duty exemption was not sought. Purchasers have a general right to apply for a refund of tax that has been overpaid, for up to five years after the payment has been made to Revenue SA.
Cowell Clarke has been successful in obtaining partial stamp duty exemptions for acquisitions of vacant land in certain circumstances where there is a future intended mixed use of the site. Exemptions have been obtained even when the Land Use Code (LUC) is considered to be non-qualifying land according to the Revenue SA Circular No. 86.
Please contact Cowell Clarke for assistance with applications to Revenue SA to obtain stamp duty concessions.
Off-the-Plan Stamp Duty Concession
Unfortunately, good things don’t always come in three’s.
Up until 30 June 2018, purchasers of off-the-plan apartments were afforded a partial stamp duty concession.
The State Government has not made any announcements to extend this concession post 30 June 2018.
Therefore, at the time of writing this article, purchasers of all off-the-plan contracts signed after 30 June 2018 will not be able to obtain the stamp duty concession that was previously available.
Purchasers who entered into contracts on or before 30 June 2018 (even if settlement occurs after 30 June 2018) are still entitled to the stamp duty concessions.
Whilst it is possible that the State Government may reinstate the concession, at this point in time, vendors, developers and agents should review all marketing material and other disclosures including existing draft Contracts for Sale to ensure they reflect the current legislative position and to ensure all information and documentation provided to prospective purchasers regarding eligibility for stamp duty concessions is not in any way misleading.
If you have any queries in relation to these changes please contact Sam Richardson.