Effective from 1 July 2018, the Treasury Laws Amendment (2018 Measures No. 1) Act 2018 imposes obligations upon Buyers of certain new residential premises1 and certain potential residential land 2 to withhold and remit GST directly to the Australian Taxation Office (ATO)

Key features of the new regime include:

  • GST withholding on new residential property supplies;
  • the amount of GST withholding payable by the purchaser to the ATO;
  • the timing of the payment of GST withholding to the ATO;
  • Sellers are required to notify a Buyer re GST Withholding;
  • penalties for a Seller for failing to notify;
  • penalties for a Buyer for failing to withhold;
  • Seller’s credit for GST withholding;
  • transitional provisions for pre-1 July 2018 contracts; and
  • pre-1 July 2018 property development arrangements.


The new laws are primarily an anti-avoidance measure designed to prevent the occurrence of ‘phoenix’ companies which fail to pay GST on property transactions to the ATO.

The new laws essentially require a Buyer to pay the GST applicable to a transaction direct to the ATO rather than to the Seller.


From 1 July 2018, the new laws will apply to:

  • the sale or long-term lease (generally over 50 years) of new residential premises (other than residential premises created through substantial renovations of a building and commercial residential premises); and
  • potential residential land that is included in a property subdivision plan and which does not include any building used for a commercial purpose.The laws apply to all contracts entered into after 1 July 2018 and, also, to contracts entered before 1 July 2018 which do not settle before 1 July 2020.

Seller’s notification

A Seller is now required, prior to making a supply by way of sale or long-term lease, of any residential premises or of any potential residential land to another entity, to provide to the Buyer a written notice stating:

  • whether the other entity will be required to make a withholding payment; and
  • if the Buyer is so required, details of:
    • the Seller’s name and ABN;
    • the amount that the other entity will be required to pay to the ATO;
    • when the other entity will be required to pay that amount; and
    • if some or all of the consideration for the supply will not be expressed as an amount of money – the GST inclusive market value of so much of the consideration as will not be expressed as an amount of money; and
    • such other matters are specified in the regulations.

The notification requirements do not apply to a supply of commercial residential premises (e.g. a hotel, motel, inn, hostel or boarding house) nor do they apply to a supply of potential residential land to another entity if the other entity:

    • is registered for GST; and
    • acquires the land for a creditable purpose.

The REIQ Contract for Houses and Residential Land contract has been recently updated to a 15th edition which incorporates the required notification by the Seller as to whether or not the Buyer is required to make a withholding payment.In the event that a withholding payment is required to be made by a Buyer, the more specific notification required to be given regarding the Seller’s name and ABN etc can be given by way of a separate notice or included in the contract as a special condition.

Obligations for a Buyer

If a Buyer is required to make a GST withholding, the steps involved for the Buyer are as follows:

  • lodge a Form One – GST Property Settlement Withholding Notification with the ATO prior to settlement (following which a Lodgment Reference Number (LRN) and Payment Reference Number (PRN) will issue);
  • lodge a Form Two – GST Property Settlement Date Confirmation with the ATO when the settlement date is known;
  • withhold and pay (on or before settlement) to the ATO (or to the Seller acting as the Buyer’s agent to pay the withheld amount to the ATO) either:
    • one-eleventh of the contract price; or
    • 7% of the contract price (if the GST margin scheme applies); and
  • pay the balance purchase price (less the GST withholding) to the Seller.


Under the new laws, the penalties will apply where:

    • the Seller fails to provide the requisite notice to the Buyer.The obligation for a Seller to provide the requisite notice to a Buyer is a strict liability offence, with a maximum fine that can be imposed by a Court of 100 penalty units (currently $21,000) for individuals or 500 penalty units (currently $105,000) for corporations. Alternatively, the ATO may impose an administrative penalty of 100 penalty units ($21,000).
    • the Buyer fails to withhold the required withholding amount.

The Buyer’s failure in this situation gives rise to an administrative penalty equal to the amount of the GST payable (unless it has reasonably relied on notification by the Supplier or if it has provided the Seller with a bank cheque for the withheld amount).

Law Companion Ruling

The ATO has issued Law Companion Ruling LCR 2018/4 which addresses the changes in detail and provides useful examples demonstrating the intended application of the law.


The new laws will have a serious implication for the cash flow of property developers and will impose administrative burdens on Buyers who may not otherwise be part of the GST reporting system.

New REIQ form contracts have recently been released which assist in addressing the obligations of Sellers and Buyers under the new laws.

1 Residential Premises means land or a building that is occupied as a residence or for residential accommodation or is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.
2 Land that is permissible for use for residential purposes, but that does not contain any buildings that are residential premises.