From 1 July 2018 buyers of certain new residential premises and potential residential land are required to withhold an amount from the price and pay it to the Australian Tax Office (ATO).
The property transactions impacted are:
taxable supplies of new residential premises or
taxable supplies of potential residential land.
The REIQ standard contracts have been updated to take into account these new laws and imposes obligations on each of the parties to the contract.
What must sellers do?
To give certainty to buyers, a seller must give written notice to a buyer before making a supply (i.e. prior to settlement) whether the buyer will be required to make a withholding payment from the settlement proceeds. If a buyer is required to withhold, the seller must also notify the buyer what the amount is as well as other prescribed information.
There are penalties for failing to provide such notice.
What must purchasers do?
A buyer must notify the ATO of the amount to be withheld on or before the day of payment of the first consideration other than the deposit, usually settlement.
There are two ATO online forms that the buyer must complete to notify the ATO of the withholding and receive the required payment references. Your solicitor or conveyancer will liaise with you to arrange completion of these forms.
The percentage or fraction to be withheld is:
Some property transactions are excluded from the new measures and you should speak with your solicitor if you are unsure whether you will be impacted by these new laws.