Federal Budget "Property Facts" You May Not Have Heard About
These affect anyone who buys a property after 1st July 2017 … not just property investors!
I was shocked to discover the ATO is now passing responsibility for withholding tax (gst) onto property buyers. This fact seems to have largely slipped under the radar since the Federal Budget was handed down on 9th May 2017. It’s had very little (if any) coverage in the media. Thanks to BAN TACS (Newsflash #320) for bringing this to my attention and to Courtenay Burn of Burn Professional Conveyancing for shedding further light on the subject (we are still waiting on clarification on several points and will update you as they come to light).
If you buy any property for $750,000 or more from 1st July 2017 (even your own home) the seller must provide you with a clearance certificate from the ATO or you must withhold 12.5%. No exceptions. If you don’t obtain a clearance certificate from the seller then you must withhold 12.5% of the purchase price and send it to the ATO. Even if you don’t withhold 12.5% at settlement you still have to send that amount to the ATO out of your own pocket.
Furthermore, if you buy a brand new property after 30th June 2018 then you must withhold 1/11th of the purchase price and send it to the ATO. If you are now entering into an off the plan purchase that will settle after 30th June 2018 make sure the contract allows you to pay 1/11th less for the property in recognition that you will be sending the 1/11th to the ATO, non-negotiable. Note that this only applies to residential premises or land, not business properties.
Both of these could be very nasty stings in the tail if you and your settlement agent don’t get them right. Hence, the need to engage an excellent settlement agent, not just the cheapest one.
These are two very important changes that all Australian property buyers need to be aware of, they don’t just affect property investors. Make sure you spread the word and if you’re buying a property after 1st July 2017, check that your settlement agent is up to speed on these changes or it could cost you dearly.