The withholding amount is generally required to be paid by settlement date (under a standard land contract). Where a property is acquired under an instalment contract, the due date for the withholding payment is on the day the first instalment is paid. A payment may be made to the ATO by the buyer either directly or indirectly (through the seller).
TAX TIP – Transitional rule for pre-1 July 2018 contracts
A supply of new residential premises or potential residential land is not subject to GST withholding provided it is made under a contract entered into before 1 July 2018, and any consideration for the supply (other than a deposit) is given prior to 1 July 2020 (i.e., effectively, where settlement occurs by 30 June 2020). Note that further transitional rules may apply for certain ‘waterfall’ payment arrangements entered into prior to 1 July 2018.
When does GST withholding apply to a property sale?
The GST withholding rules apply to taxable supplies (by way of sale or long-term lease) of certain new residential premises and potential residential land. These supplies are taxable supplies (under S.9-5 of the GST Act) where they are made by a GST-registered taxpayer (or a taxpayer that is required to be registered for GST) in the course of carrying on their enterprise, relate to property located in Australia and are neither GST-free nor input taxed.
In this regard, supplies of new residential premises and potential residential land are generally not input taxed supplies (with the exception of new residential premises used for residential accommodation before 2 December 1998). Refer to S.40-65(2)(b) of the GST Act.