GST Withholding at Settlement

Ensuring Corporate Documents' Enforceability - What to Know


Entering into a Contract to purchase or sell a new residential property after 1 July 2018? Check out this article to see if you’re required to withhold GST!

If you are purchasing a property and have entered into a Contract after 1 July 2018, you may be required to withhold an amount from the Seller to pay to the ATO after settlement. This will usually apply to purchasers who are buying new residential premises or land (e.g. off the plan contracts).

Purchasers (who are required to withhold) must complete and submit two online forms:

  • Form 1: GST property settlement withholding notification (Link); and
  • Form 2: GST property settlement date confirmation (Link)

Form 1 is to notify the ATO that a contract has been entered into for the supply of new residential premises or potential residential land in which there is a withholding obligation. You can submit Form 1 at any time after a contract has been entered into and prior to the date the withholding obligation is due. Usually that will be the settlement date so once registration occurs you can definitely complete this form to obtain a lodgment reference number (LRN) and a payment reference number (PRN).

Form 2 is to confirm the settlement date with the ATO and that settlement has taken place. You can submit Form 2 at the time the withholding obligation becomes due, either at settlement or as soon as practical thereafter (after settlement).

At settlement, the Seller will draw a cheque from their sale proceeds to the ATO. Failure to submit these forms or make the payment on time may result in penalties being imposed.

Please contact our office if you have any questions.

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