On 1 July 2018, a new regime of GST withholding obligations comes into effect and is set to create considerable change to property transactions which property lawyers should be aware of.
Where a supplier (the vendor) makes a taxable supply of new residential premises or a subdivision of potential residential land by way of sale or long term lease, the recipient of the supply (the purchaser) is required to withhold an amount from the contract price and remit it to the Australian Taxation Office on or before settlement.
As a result, new vendor disclosure obligations apply to all Contracts for Sale of Land. This means property lawyers will need to revise the Contract for Sale to ensure vendors are not in breach of legislation. Failure to provide disclosure will result in penalties.
The amended legislation includes a transitional arrangement that excludes sale contracts entered into before 1 July 2018 as long as the property transaction settles before 1 July 2020. This will provide certainty for sale contracts that have already been signed.