SYDENY: The Australian Government is consulting on draft legislation to amend the goods and services tax (GST) rules for property transactions from July 1, 2018.
The Government has proposed that purchasers should withhold the GST on the purchase price of new residential premises and new residential subdivisions. They would then remit the GST directly to the Australian Taxation Office (ATO) as part of settlement.
The intention is to address tax evasion through the use of “phoenixing” arrangements, where developers collect GST from their customers but dissolve their company to avoid paying the GST to the ATO. The Government said that this type of phoenixing activity in the property development sector has been growing in spite of sustained compliance activity by the ATO.
To provide certainty for contracts that have already been entered into, the draft legislation provides for a two-year transitional arrangement. Contracts entered into before July 1, 2018, will not be affected, provided that the transaction settles before July 1, 2020. The measure will apply to contracts that settle on or after July 1, 2020, regardless of the date of the contract.
Revenue Minister Kelly O’Dwyer said: “Currently, developers can have up to three months to remit GST after the sale of newly constructed residential premises and new subdivisions, allowing dishonest developers time to phoenix and avoid their GST obligations. This measure will ensure the GST is paid over to the ATO.”
