GST withholding on residential property transactions

Treasury has released on proposed amendments to give effect to the 2017-18 Federal Budget announcement to impose an obligation on purchasers of ‘new residential premises’ or ‘potential residential land included in a property subdivision plan’ to withhold and remit 1/11th of the purchase consideration to the Australian Taxation Office (ATO) on or before the day that consideration for the supply (other than a deposit) is first provided. The obligation will take effect from 1 July 2018.

This withheld amount is effectively on account of the potential goods and services tax (GST) amount payable on the supply, irrespective of the fact that the actual amount of GST payable by the vendor may be less than 1/11th of the total price (for example, if the supply is made under the margin scheme). The vendor is entitled to a credit for the amount withheld via their Business Activity Statement (BAS). Refer to our for further information about the key aspects of the exposure draft law.

Productivity Commission reports on GST on low value imported goods

The Productivity Commission (the Commission) has released its report on Collection Models for GST on Low Value Imported Goods.  . Below is a summary of the key points from the report:

·       Given the Government’s decision to collect GST on low value imported goods, the Commission has concluded that the legislated model is the most feasible among the imperfect alternatives at this time.

·       Although there is an in-principle case to delay implementation of the legislated model to provide more time for technological changes to play out, to learn from the experiences of other nations and to avoid ‘first mover’ risks, the Commission considers there is insufficient basis to recommend delaying the implementation schedule, given the Australian Parliament’s decision to apply the GST to low value imported goods.

·       The Commission has identified some prospective improvements to the design of the legislated model and enforcement strategy, although it has not been in a position to adequately evaluate these options. If the legislated model does not perform broadly as expected, these options should be considered as part of a future review.

To understand the implications of the new rules, refer to our TaxTalk Alert: GST: Import of low value goods into Australia taxed from 1 July 2018.