Investing in new property investment in your SMSF?

03-02-2020

If you’re purchasing new residential property or potential residential land as part of your SMSF investment portfolio, there may be GST considerations to be aware of.

History

In the May 2017 Federal Budget, the Government announced the withholding obligation. This measure was introduced to ensure that payment of GST is not avoided by ‘phoenixing’ activity in the property sector involving property developers and vendors. (Phoenixing activity involves the use of insolvency to avoid the payment of debts, including taxes. ‘Phoenixing’ in the property development industry has grown significantly.)

Paying GST at settlement will help prevent non-compliance by property suppliers who sell properties for a price that includes the GST and avoid remitting the GST to the ATO.

Lodging forms

Purchasers, who have a GST withholding obligation, must complete and lodge two forms:

  • when you sign the contract, lodge Form one: GST property settlement withholding notification using information from the supplier notification (see below)
  • when the property settles
    • lodge Form two: GST property settlement date confirmation, and
    • pay the GST withheld amount.

If you purchase multiple properties, lodge a new form for each property transaction.

Supplier notification

To complete Form one, the supplier (seller/vendor) needs to give you a ‘supplier notification’ so you know whether or not there is a GST withholding obligation.

If there’s an obligation to withhold GST, the supplier notification must include:

  • the name and ABN of all suppliers
  • GST branch number (if applicable)
  • the amount of GST to be withheld (rounded down to the nearest dollar)
  • when the GST must be paid to us
  • GST-inclusive contract price (plus the GST inclusive market value of non-monetary consideration, such as land swaps).

A supplier’s written notice can be relied on:

  • when it states a purchaser isn’t required to pay an amount to the ATO. In most states and territories the standard contract of sale clearly states if a purchaser is required to withhold GST or not
  • if the purchaser is unaware of an error on the notice and the supplier doesn’t tell them.

However, if the purchaser or their representative knows that a supplier is registered for GST and selling new residential premises, it’s unreasonable not to withhold and pay an amount to the ATO at settlement.

For more information or to book in with one of our accountants call the office today on 07 5444 1022. 

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