Measures to strengthen compliance with the GST law in the property development sector have been introduced into parliament this week.
The Treasury Laws Amendment (2018 Measures No 1) Bill 2018 will amend several tax laws to require purchasers of new residential premises and new subdivisions of potential residential land to make a GST payment directly to the ATO as part of settlement from 1 July 2018.
This was announced in the 2017-18 Federal Budget, is designed to counter tax evasion where some developers collect GST from their customers but dissolve their company to avoid paying it to the ATO. Currently, developers may have up to three months to remit GST after the sale of newly constructed residential premises and new subdivisions, allowing dishonest developers to avoid their GST obligations.
The government claims that the cost impacts on purchasers using conveyancing services are expected to be minor, given this change leverages the existing disbursement process and the use of standard contracts.
CPA Australia understands and agrees with the intent of the Bill, though disagrees with the assumption that the change will have minimal impact on most purchasers.
The impact on the cash flow of builders could be quite significant
In its submission on the draft legislation, CPA Australia stated that it is the experience of its members that GST on property transactions can be complex, including calculating the GST payable, and that such transactions may be outside the skills of many BAS and tax agents, let alone conveyancers.