On 1 July 2018 GST Withholding legislation commenced, introducing complex rules that required the recipient of a supply of new residential property or potential residential land (typically a Buyer) to withhold GST at settlement and remit it to the ATO. Transitional arrangements generally applied to contracts or options entered into prior to 1 July 2018, as long as settlement occurred before 30 June 2020. The effect of the transitional arrangements was that suppliers and recipients were not subject to the GST Withholding legislation on those qualifying contracts or options.
On 30 June 2020, these GST Withholding regime transitional arrangements will end. If contracts entered into before 1 July 2018 have not settled before 1 July 2020:
- recipients of a supply of new residential premises or potential residential land under those contracts may have a withholding obligation at settlement; and
- the suppliers of any residential premises under those contracts may be required to give a notice before settlement stating whether the recipient of the supply is required to withhold.
It is important to note that payment of any GST Withholding amount is the recipient’s responsibility. A failure to pay the GST Withholding amount to the ATO may have serious consequences. In addition to liability for the GST Withholding amount, a penalty (equal to the amount required to be withheld) may apply where a recipient of a supply fails to comply with the GST Withholding laws.