New home buyers set to become GST collectors come July 1

first_imgBuyers must withhold GST even if a contract required full purchase price be paid.BUYERS of new properties will become tax collectors for the ATO in six months’ time — part of a plan to tackle a $3billion phoenixing problem.The move was designed to crack down on property developers who went “phoenixed” or went into liquidation before they could pay GST element of their transactions.The ATO move — where purchasers of new property will have withhold 1/11th of the purchase price to pass on to the Australian Taxation Office — has been panned by industry.GlobalX CEO Peter Maloney, said it would mean more red tape for buyers and their lawyers.“The settlement process can be a stressful time for many buyers and these changes will add further, unnecessary pressures that will only benefit the ATO,” he said.More from newsParks and wildlife the new lust-haves post coronavirus23 hours agoNoosa’s best beachfront penthouse is about to hit the market23 hours ago“Instead of adding more red tape, we should be seeking ways to reduce the already cumbersome process consumers face when buying and transacting property.”The 2017 Budget measure comes into effect on July 1 next year.“What this will also mean is that, at least 14 days before the transaction occurs, developers must notify buyers of their requirement to withhold that amount. And, if they failed to advise buyers before that deadline, the ATO has said developers would face penalties.“These changes are the ATO’s attempt to reduce instances of ‘phoenixing’ — where property developers go into liquidation before paying the GST on the sale of new homes over to the ATO — but one-size-fits-all legislative reforms are inappropriate because they penalise the majority for the actions of a minority.”Gadens Partner Matthew Raven said buyers had to withhold the GST amount even when a contract required the full purchase price to be paid to the seller at settlement.“Unlike the Foreign Residents Capital Gains Withholding regime, which was introduced earlier this year, there is no ability for developers to obtain an ATO clearance, meaning all sales will be affected once the change is enacted.”He expected the measure to “ruffle a few feathers within the legal sector” who were trying to streamline the settlement process “not complicate it further”.last_img

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