The final requirement for GST withholding to apply to potential residential land is that the land does not contain a building that is in use for a commercial purpose. Refer to S.14-250(2)(b)(ii) of Schedule 1. Broadly, this excludes land upon which a structure of sufficient permanence is installed on and integrated, where the actual, current and ongoing use of the structure (taking into account all the circumstances) is objectively for a commercial purpose. Refer to paragraphs 30 and 31 of LCR 2018/4.
What information must a seller provide to a buyer?
Under S.14-255(1) of Schedule 1, a taxpayer that makes a supply of residential premises or potential residential land (i.e., a ‘seller’) is required to provide a ‘supplier notification’ to a taxpayer acquiring such property (i.e., a ‘buyer’) prior to settlement.
There are limited exceptions to this requirement (listed in S.14-255(2) of Schedule 1), which apply in either of the following circumstances:
- A supply is made of commercial residential premises.
- A supply is made of potential residential land to a buyer that is GST-registered and who has acquired the land for a creditable purpose.
Penalties may apply to a seller who fails to provide a supplier notification to a buyer as required. Refer to S.14-255(4), (5), (6) and (7) of Schedule 1.
TAX WARNING – Supplier notification not limited to a supply of new residential premises
When residential premises are being sold, a seller’s obligation to provide a supplier notification is not limited to a supply of new residential premises. That is, the obligation for a seller to provide the buyer with a supplier notification also applies to the sale of an old house or any other residential premises (that are not ‘commercial residential premises’).