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Duty remains payable on GST for property sale

Posted by Northadvisory on August 6, 2018

Following new GST obligations on certain property purchases which took effect from 1 July 2018, Revenue NSW has clarified that duty continues to be payable on the GST component of such a sale.

 
From 1 July 2018, purchasers of new residential property and subdivisions of potential residential land are obliged to withhold GST from the contract price and pay this to the ATO on behalf of the vendor. This change was enacted by Sch 5 to Treasury Laws Amendment (2018 Measures No 1) Act 2018. The GST component is to be remitted to the ATO, or the withheld amount paid to the vendor via a bank cheque made out to the Commissioner of Taxation, on or before settlement.

 
Under the Duties Act 1997 (NSW), if the consideration relates to a taxable supply that is subject to GST, duty will be payable on the total consideration, including any amount paid on account of GST, regardless of how the consideration is expressed for GST purposes.

 

Revenue Ruling No DUT 047 states that previously when the consideration related to a sale of land that was a taxable supply, the purchaser paid duty on the GST inclusive purchase price to the vendor (including any amounts paid on account of GST). The vendor then remitted the GST to the ATO.

 

Regardless of the new obligations on the part of the purchaser to withhold GST on behalf of the vendor, the rulings clarifies that duty is still payable on the GST component of the purchase price. This applies whether the purchaser pays the withheld GST amount directly to the ATO or to the vendor via bank cheque made out to the ATO.

 

If you have questions on any of the above issues raised, please do not hesitate to contact us.

Kim Edwards
Chartered Tax Adviser
Chartered Accountant
T: 02 9984 7774
E: kime@northadvisory.com.au