Australia: Another withholding regime in conveyancing – GST and new residential premises


  • Buyers, developers and financiers of new residential premises or land within a subdivision in Australia.


  • From 1 July 2018, buyers of new residential premises or land within a subdivision may need remit 1/11th of the purchase price directly to the ATO.
  • Developers must notify buyers of the obligation, and buyers must notify the ATO of an intended withholding payment.


  • Review existing and pro forma contracts to consider the potential impact.
  • Update pro forma contracts to reflect the new withholding regime and its specific requirements.
  • Understand the implications on working capital, financing, modelling and projections.

Draft legislation establishing another withholding regime, requiring buyers of new residential premises and land within a subdivision to pay goods and services tax (GST) on the purchase price directly to the Australian Taxation Office (ATO), has been released and The Treasury consultation process has now closed.

What are the provisions?

Buyers must withhold the GST amount (1/11th of the purchase price) and pay this directly to the ATO on or before the settlement date (or another time determined by legislative instrument) rather than the seller. They must give notice of the intended payment to the ATO at least five days before they are required to make the payment.

Developers must issue a notice to withhold to buyers at least 14 days prior to settlement, which must provide the developer's name and ABN, the GST amount and the payment date (i.e. the settlement date). Failure to notify buyers is a strict liability offence, though it will not affect the enforceability of a contract.

Developers must report the actual GST amount through their Business Activity Statement (BAS), and are entitled to a credit for the amount paid by the buyer at settlement, or a refund if the amount paid exceeds the actual GST liability.

What contracts are captured?

The regime applies to both:

  • 'new residential premises', being premises not previously sold as residential premises, and
  • 'potential residential land', being land permissible for use for residential purposes which does not contain buildings that are residential premises, where that land is included in a property subdivision plan.

Practically, the provisions will apply to any off-the-plan residential development, though other smaller transactions may also be captured.

The changes will take effect from 1 July 2018, and will apply to all contracts where the purchase price is paid after 1 July 2020 (regardless of the contract date). Transitional relief will apply to all contracts entered into before 1 July 2018, so long as the purchase price is paid before 1 July 2020.

What about the margin scheme?

The withholding provisions still apply where a developer applies the margin scheme, meaning that 1/11th of the purchase price will be withheld and remitted, notwithstanding the lower liability under the margin scheme. The developer will need to obtain a refund from the ATO through their BAS, though a refund mechanism has been proposed for developers with quarterly tax periods.

What about contracts where the purchase price is paid in instalments?

Where an instalment contract is entered into for residential premises, the first part-payment of the purchase price (excluding any deposit) will trigger the buyer's withholding obligation on the whole GST amount, irrespective of the instalment amount.

What are some of the key issues?

  • Currently, developers enjoy a cash flow benefit when receiving sale proceeds, as the purchase price includes the GST amount and they have up to four months to remit this to the ATO. The changes remove this benefit (effectively reversing it in favour of the ATO), so developers will need to consider how the changes impact their working capital, finance arrangements, modelling and projections.
  • Financiers will need to factor this withholding into their assessment of funding and eventual repayment. As 1/11th of the purchase price will be withheld at settlement, those funds will not be available to repay the development funding, and it may take longer for that to be repaid in full. When determining any presale requirements, financiers should ensure that the value of qualifying presales reflects this, potentially by setting a GST exclusive aggregate value requirement, which assumes a full 10% GST (notwithstanding that the margin scheme may otherwise apply).
  • Developers need to comply with the legislative requirements around notifying buyers of the withholding, as non-compliance will result in strict liability penalties, currently up to $21,000 per offence.
  • Developers can elect to lodge their BAS monthly or quarterly to obtain their GST credits. However, under the draft legislation developers can only receive refunds for any overpayment of the GST liability as part of their quarterly BAS lodgment.
  • Under the draft legislation, developers may only claim a credit from the ATO if the GST amount is actually paid. The obligation to pay falls on buyers, so developers will need to ensure that there are positive obligations in contracts that require the buyer to notify and remit the GST amount to the ATO immediately on settlement.
  • The draft legislation requires developers and buyers to notify the ATO of the GST amount being withheld at least 14 and five days from settlement respectively, however the GST amount is calculated on the purchase price plus or minus the usual settlement adjustments (e.g. rates, land tax, body corporate levies and insurance). As the actual consideration to be paid is generally not determined until a few days prior to settlement, minor discrepancies will likely occur, resulting in small GST liability and credits being determined by the ATO when developers lodge their BAS.
  • Buyers will need to ensure they pay the GST amount being withheld to the ATO, though the requirement for this to be done 'on or before' the settlement day poses significant practical difficulties, and it is expected that a grace period will be allowed. Buyers may be subject to a penalty where they fail to pay the required amount to the ATO.

What you should do next

Developers should seek legal advice to ensure contracts for residential premises are properly drafted or amended to comply with the proposed legislation. Developers should also consider the cash flow and other financial impacts of the changes on their current and future residential developments.

Financiers of developers will need to factor in the effect of the withholding provisions when assessing funding requests, particularly in relation to presale requirements and the number of settlements required for repayment.

Buyers should ensure that they are aware of and comply with their withholding obligations, whether or not those are described in the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions