The below table contains a schedule of the operational process relating to the new GST withholding tax regime which commenced on 1 July 2018.
At this stage, the ATO has resolved the payer procedures and processes i.e. for the payments being made by the purchasers on behalf of the vendors of residential property. However, the ATO has not finalised the electronic data information required for Vendors (i.e. Property Developers) to track and reconcile the payments being made by the purchaser on behalf of the vendor.
In order to provide you with guidance thus far, our office has prepared a summary of the processes:
|New GST Withholding Regime||Specific comments requiring your attention|
|1, 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 the purchaser 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. (refer item 2 below)|
If the contracts have not been updated by your lawyers post 1 July 2018, please contact your lawyer or conveyancing agent to ensure the notice to the purchaser with the required information is included as part of the contract.
|2, The withholding amount: the vendor must further provide notification of the GST to be remitted to the ATO||· 1/11th of the contract price (for fully taxable supplies), or|
· 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)
|3. Payment to be made & confirmation from the ATO||Purchaser is to complete 2 forms online:|
· Form One is the the GST property settlement withholding notification
· Form Two is the GST property settlement date confirmation
· Purchaser must then pay the GST withheld amount to the ATO using the PRN (payment reference number) available from the forms completed
· ATO will provide vendor confirmation by email, i.e. the GST credit amount for the related property settlement
· Vendor must update email address for their activity statement account to receive this confirmation
|The ATO has confirmed thus far that once the 2 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. This is the email address to which all correspondence relating to the GST payment will be forwarded to.
If you would like VCA to update these details please advise our office and we can make the necessary changes.
Reconciliation of GST on settlement is still somewhat unresolved with the ATO electronic processes not yet updated on the portal. As soon as they become available we will communicate the same with you.
|4. 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 Step 3 above.|
Once available on the Portal, cross-check the records to confirm the amount withheld, with the details confirmed by email notification from the ATO, match and have been credited to your ABN Integrated client account.
It is imperative that at settlement, if possible you are provided with the PRN and or the LRN number (lodgement reference number). This requirement may differ once the ATO payment disclosure procedures are in place.
|5. When should payment be made||· Purchaser is to make payment:|
o Under standard land contract – payable to the ATO on the day of settlement
o Under an instalment contract – payable to the ATO on the day of the first instalment
|6. Effect on Vendor’s Business Activity Statement||· Vendor to report total sale price and GST payable as per withholding amount above|
· Once vendor has lodged their BAS, the vendor will receive a credit for the amount the purchaser has withheld and paid to the ATO
|These processes (i.e. how the reconciliation process will occur) remains unresolved with the ATO. As the ATO continues to release and update their computer programming on the portal, we will update you as it progresses.|
Should you have any questions, 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.