Changes to payment of GST on taxable supplies of certain real property

The Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 (Cth), which was introduced to Parliament on 7 February 2018, will (subject to the bill being passed by Parliament) from 1 July 2018, affect the way the Australian Tax Office collects GST on the taxable supply of:

new residential premises (other than those created through a substantial renovations and commercial residential premises); or
a subdivision of potential residential land (being land that is permissible to use for residential purposes, but does not contain any residential premises) by way of sale or long term lease.

In these circumstances:

the recipient of the supply (the purchaser) has the obligation to pay to the ATO a payment of part of the consideration either prior to or at the time consideration is first provided for the supply, other than as a deposit – should there be more than one purchaser:

it is a joint obligation for the purchasers, should they be purchasing as joint tenants; and
it is a separate obligation for each purchaser, should they be purchasing as tenants in common, with each purchaser’s obligation in relation to the amount payable to the ATO being in proportion to the shares in which they own the property as tenants in common; and

the supplier of new residential premises or subdivisions of potential residential land will be entitled to a credit for the amount of any payment made to the ATO by the purchaser.

Normally, the time that the consideration is first provided for the supply, other than as a deposit, will be at settlement.

The amount to be paid to the ATO is a proportion of the ‘contract price’, being the price set for the supply in the contract, not taking into account any adjustments:

If the margin scheme does not apply to the taxable supply, the purchaser must pay 1/11^th of the contract price to the ATO.
If the margin scheme applies to the taxable supply, the purchaser must pay 7% of the contract price (or a greater amount, not more than 9%, that has been determined by the Minister for Revenue and Financial Services) to the ATO.

Contracts entered into prior to 1 July 2018 will not be affected by the changes above so long as they complete prior to 1 July 2020.