The below table contains a schedule of the processes relating to the new GST withholding tax regime which commenced on 1 July 2018.
To date the ATO has resolved the payer processes i.e. the collection of payments being made by the purchasers on behalf of the vendors of residential property. However, the ATO has not finalised the electronic data processes for the purpose of vendors reconciling the payments made by the purchaser on their behalf. Here below is a summary of the procedures and processes thus far. Should you require clarification on any of the items therein please contact Noe, Kirsty or Oggy.
|GST Withholding Regime||Specific comments requiring your attention|
|Steps to undertaken when a contract is entered into|
|1. Vendor to complete||Vendor gives notice to the Buyer that the:|
· Buyer is NOT required to make payment under the GST Withholding Tax Legislation OR
· Buyer is required to make a payment under the Withholding Law
|2. Vendor to provide||If the GST withholding rules apply, the vendor is required to provide the following details to the purchaser prior to settlement:|
· name and ABN of the vendor
· amount they must withhold to the Australian Taxation Office (ATO)
· the date the purchaser must pay the withholding to the ATO
· the GST inclusive market value of that property (but only if the consideration for the supply includes property)
|Note: Most standard land contracts are being updated to include the information required to discharge a supplier’s notification obligation.|
However, if the contracts have not been updated by your lawyers post 1 July 2018, please contact them or your conveyancing agent to ensure the notice to the purchaser with the required information is included as part of the contract.
|3. Withholding amount |
(vendor must provide in their notification)
|· 1/11th of the contract price (for fully taxable supplies)|
· 7% of the contract price (for margin scheme supplies), or
· 10% of GST exclusive market value of the supply (for supplies between associates for consideration less than GST inclusive market value)
|4. Completion of Form One – GST Property settlement withholding notification||First form that is required to be lodged with the ATO:|
· Can be lodged at any time after contract has been entered into and up until the due date for payment of the withholding amount
· Confirmation will be provided via a Payment reference number (PRN) and a lodgement reference number (LRN)
· PRN & LRN is required to lodge the second form and PRN will be used to make payment
|5. Completion of Form Two – GST Property settlement date confirmation||To be lodged with the ATO on or before date of settlement. Need to provide:|
· LRN – Lodgement reference number
· PRN – Payment reference number
· Actual settlement date
· Total withholding payment – This is the amount provided in the written notification which is supplied by the vendor
|It is imperative that at settlement, if possible you are provided with the PRN or LRN number. This may differ at a later date once the ATO procedures are in place.|
Reconciliation of GST on settlement is still somewhat unresolved, with the ATO electronic processes not being updated on the portal. As soon as they become available we will communicate the same with you.
|6. Who can complete the online notification forms||· purchaser or|
· a representative of the purchaser to lodge one or both forms on their behalf by providing the representative with a signed declaration
· purchaser’s representative can include either a conveyancer or solicitor
|7. Payment to be made||· Purchaser to pay the withheld amount to the ATO using the PRN available|
· Purchaser to receive an email confirmation once payment is processed
· ATO to provide vendor confirmation by email of GST credit amount and the related property settlement
· Vendor to update email address for their activity statement account to receive this confirmation
|The ATO have confirmed that once the forms are completed , an email confirmation will be sent to the vendor advising the GST credit amount the purchaser has paid.|
Please ensure the email address on your activity statement is updated. If you would like us to update any of these details , please advise and we can make the necessary changes.
|8. Settlement process||· Vendor to check settlement statement to ensure amount withheld is as per the notification provided to purchaser||Please ensure the settlement statement includes the amount withheld as per your notification to the purchaser in Steps 2 & 3 above.|
An additional check would be to confirm the amount withheld with the details confirmed by the email notification from the ATO issued in Step 7 above.
|9. When should payment be made||·Purchaser to make payment to the ATO:|
oUnder standard land contract – on the day of settlement
o Under an instalment contract – on the day of the first instalment
|10. Effect on Vendor’s Business Activity Statement||·Vendor to report total sale price and GST payable|
·Once the BAS is lodged, the vendor will receive a credit for the amount the purchaser has withheld and paid to the ATO
|This process is still somewhat unresolved with the ATO, as to how the reconciliation process will occur. As the ATO continues to release and update their computer programming on the portal we will communicate with you in relation to the same.|
Should you have any questions or if we can assist in any part of this process, please contact our office.
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.