Australia: New GST withholding provisions introduced for residential purchases

Last Updated: 12 March 2018
Article by Carlos Gouveia


The Federal Government has recently introduced the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 (Bill) which will implement the proposal announced in the 2017-18 Federal Budget: that buyers of new residential premises or new residential subdivisions will be required to remit GST on the purchase price as part of the settlement process from 1 July 2018. The proposal is intended to combat phoenix activities in the property industry.

If enacted, the Bill will create adverse cash flow issues for sellers of affected property and compliance issues for both sellers and buyers. Administration of the new regime will also pose challenges for the Commissioner. However, it is fair to say that the Bill is an improvement on the original exposure draft as a result of industry and stakeholder consultation.


The withholding obligation applies to a buyer or lessee under a long-term lease (recipient) (a long-term lease is broadly a lease for a period of at least 50 years) of:

  • new residential premises, other than those created through a substantial renovation of a building and commercial residential premises, or
  • potential residential land (which is land that can be used for residential purposes but does not contain any buildings that are residential premises) that is included in a property subdivision plan and does not contain any building that is in use for a commercial purpose, but only if the recipient is not registered or does not acquire the property for a creditable purpose. The withholding obligation therefore does not apply to business-to-business transactions involving potential residential land

The transaction must be a taxable supply so withholding is not required if the transaction is GST free, input taxed or not treated as a taxable supply (for example, a supply between members of a GST group).


Payment must be made by the recipient on or before the day any of the consideration for the transaction (other than the deposit) is first provided or on the day of the transaction if the transaction is between associates and no consideration is provided. Given that there will be practical difficulties in meeting this timeframe, we query whether the Commissioner will introduce a grace period for payment as an administrative arrangement, as applies to capital gains tax withholding.

The Bill requires different amounts to be paid depending on whether or not the margin scheme applies and whether or not the transaction is between associates for less than market value:

  • if the margin scheme applies, the amount is 7% of the GST inclusive contract price, although the Minister has the power to determine a different percentage between 7% and 9%
  • if the margin scheme does not apply, the amount is 1/11 of the GST inclusive contract price
  • if the transaction is between associates and is without consideration or is for consideration that is less than the GST inclusive market value, the amount is 10% of the GST exclusive market value

The contract price does not take into account any potential adjustments which simplifies the compliance burden for the parties.

The Bill contains apportionment rules for mixed supplies and multiple buyers or lessees. Joint tenants are jointly liable to make the payment but any of the joint tenants may discharge the obligation.


The general rule is that the new rules will apply in relation to a transaction for which any of the consideration (other than a deposit) is provided on or after 1 July 2018, irrespective of the date the contract was entered into.

There are two exceptions for contracts entered into before 1 July 2018:

  1. where the consideration (other than a deposit) is first provided before 1 July 2020
  2. where the contract is a development arrangement which includes a payment waterfall which does not take into account any withholding obligation and which may result in a windfall gain to a party if the withholding obligation was applied

To qualify for the second exception, the following conditions must be satisfied:

  • the arrangement is between the seller or lessor (supplier) and one or more entities, at least one of whom will supply development services
  • the arrangement deals with the distribution of the consideration from the development
  • under the arrangement either an amount is to be distributed to the supplier on account of GST or distribution of the consideration is adjusted to take into account GST
  • broadly, a windfall gain would arise for a party if an amount was withheld
  • an amount has in fact been withheld

Where the conditions are satisfied the amount withheld is deemed to have been received by the supplier. This prevents the supplier seeking to recover the amount withheld from another party to the arrangement.


The supplier is entitled to a credit in its business activity statement equal to the amount actually paid by the recipient.

If the supplier believes that a payment or part of the payment was made in error, it may apply to the Commissioner for a refund. The application must be made no later than 14 days before the day on which the GST is payable by the supplier. It is unclear what happens if the application is made outside this period, for example is the entitlement to a refund lost? The Commissioner is obliged to refund the amount if it would be fair and reasonable to do so. This gives the Commissioner some discretion to refuse refunds and will inevitably give rise to delays. If an amount is refunded, the credit available to the supplier is reduced by the same amount.

Suppliers will need to ensure that payment has been made to the Commissioner otherwise credit and refund entitlements will be lost.


The supplier of residential premises or potential residential land must give the recipient a written notice stating whether or not the recipient will be required to withhold. If so, the notice must also contain the name and ABN of the supplier, the amount that is required to be withheld, when the amount must be withheld, the GST inclusive market value of any non-monetary consideration and any other matters that may be specified in the regulations.

The notice must be given before the supply is made. There is some uncertainty as to the time of supply because there are no time of supply rules in the GST legislation. We expect that the time of supply will be settlement of a contract of sale or entry into a long-term lease. This may be later than the time the withholding obligation arises if part of the purchase price (other than the deposit) is paid before settlement.

The obligation to give a notice does not apply if the transaction relates to commercial residential premises or if the recipient of the potential residential land is registered and acquires the land for a creditable purpose. Despite these exclusions, the obligation applies to a broader range of transactions than those transactions to which withholding applies. For example, it applies to the sale or long-term lease of residential premises which are not new residential premises.


Failure to give a notice is a strict liability offence (it is not necessary to establish fault) with a maximum penalty of 100 penalty units (a penalty unit is currently $210) for individuals and up to five times that amount for companies. An administrative penalty of up to 100 penalty units may be applied. There are defences available which broadly require a reasonable belief that there was no obligation to give a notice.

Failure by the supplier to give a notice does not affect the withholding obligation. If the recipient is in doubt about whether a payment should be made, it should make the payment because it will not be subject to any adverse consequences as under the Bill its liability to pay the amount withheld to the supplier is discharged. If the payment has been made incorrectly, the supplier may apply for a refund. The explanatory memorandum indicates that in determining whether a refund is fair and reasonable, a factor that may be relevant is whether the error was caused by the supplier's failure to give the notice.

If the recipient is required to make a payment, it must notify the Commissioner in the approved form of the amount paid on or before the due date for the payment.

Failure to make payment is not a criminal offence but an administrative penalty applies equal to the amount of the payment that should have been made. The general interest charge also applies. There are defences available in relation to the imposition of the administrative penalty if the recipient has relied on a notice provided by the supplier that was incorrect where it was not unreasonable to do so, and where the recipient has provided a bank cheque payable to the Commissioner to the supplier on or before the date that payment must be made.


Under the Bill, the Commissioner has the power to determine:

  • that certain transactions are not subject to withholding
  • a different time for payment to be made (including that amounts be paid in instalments)
  • the time that the recipient must notify the Commissioner of the amount paid
Carlos Gouveia
Corporate and advisory
Colin Biggers & Paisley

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.

Carlos Gouveia
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 Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
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