7 years ago
IMPROVING THE INTEGRITY OF GST ON PROPERTY TRANSACTIONS
Kelly O’Dwyer MP
The Government has released exposure draft legislation for public consultation on improving the integrity of GST on property transactions, as announced in the 2017-18 Budget.
The exposure draft bill amends the GST law so that from 1 July 2018, purchasers will withhold the GST on the purchase price of new residential premises and new residential subdivisions, and remit the GST directly to the Australian Taxation Office (ATO) as part of settlement.
The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said this measure will address tax evasion through phoenixing arrangements, where developers collect GST from their customers but dissolve their company to avoid paying it to the ATO.
“Currently, developers can have up to three months to remit GST after the sale of newly constructed residential premises and new subdivisions, allowing dishonest developers time to phoenix and avoid their GST obligations,” Minister O’Dwyer said.
“The measure will ensure the GST is paid over to the ATO.”
This type of phoenixing activity in the property development sector has been growing in spite of sustained compliance activity by the ATO. The measure protects the revenue and stops GST evasion through phoenixing.
“This legislation adds to the comprehensive package of reforms to address phoenixing announced by the Government earlier in the year. It will clamp down on this type of tax evasion by unscrupulous businesses and level the playing field for developers who do the right thing.”
To provide certainty for contracts that have already been entered into, the exposure draft bill provides a two-year transitional arrangement. Contracts entered into before 1 July 2018 will not be affected as long as the transaction settles before 1 July 2020.
The measure will apply to contracts that settle on or after 1 July 2020 regardless of the date of contract.