GST implications of SMSFs investing in new residential property
The GST withholding regime was introduced on 1 July 2018 which requires purchasers to remit GST to the ATO when they purchase new residential property or land.
Whilst GST is typically a vendor responsibility, for this regime it is the purchaser’s responsibility to withhold GST from certain property transactions – and remit directly to the ATO. The GST Withholding Regime is applicable for purchases of:
- New residential premises, or
- Land that could be used to build new residential property (potential residential land)
The withholding obligation means as a purchaser you must withhold an amount from the contract price of the sale and pay it to the ATO. You will need information from the Vendor to complete your obligations.
It is important to note that you can incur penalties if you fail to pay the required withholding amount to the ATO.
Funds who have a GST withholding obligation, must complete and lodge two forms:
- GST property settlement withholding notification – when the contract is signed
- GST property settlement date confirmation – when the property settles.
Determining if you have a withholding obligation
Vendors (suppliers) will need to provide you with written notification advising if you have a withholding obligation or not. The Vendor can incorporate the notice into the contract for sale – or provide it to you in a separate notice.
You don’t need to register for GST because of a withholding obligation.
If you would like further guidance on this regime in understanding your withholding obligations, then check out the ATO website – GST Withholding Regime.