What are a buyer’s obligations when acquiring assets subject to the GST withholding rules?
Under the GST withholding rules, a buyer of residential premises or potential residential land must first determine whether they are required to withhold an amount on the acquisition. If withholding applies, the buyer must:
- determine the amount to be withheld;
- notify the ATO of the buyer’s withholding obligation;
- withhold an amount (generally at settlement); and
- pay the withholding amount to the ATO (either directly or indirectly through the seller). To ensure they have met their obligations, buyers must undertake the following steps.
Step One – Review ‘supplier notification’
Under S.14-255(1) of Schedule 1, a seller is required to notify a buyer, prior to settlement (via a ‘supplier notification’), whether GST withholding applies to a supply of residential premises (other than commercial residential premises) or potential residential land (other than where the buyer is GST-registered and acquiring the land for a creditable purpose).
A buyer may rely on a supplier notification (in determining their GST withholding obligation), provided reasonable steps have been taken to ensure the information contained in the notification is correct. However, a buyer may not rely on a supplier notification containing information they know to be false.
Where GST withholding applies to an acquisition, the supplier notification also contains other useful information relevant to the withholding process, including the name and ABN of the seller, the amount required to be withheld, the due date for payment of the withholding amount and the GST inclusive contract price (which includes the GST inclusive market value of non-monetary consideration provided by the buyer).