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Withholding Tax on New Residential Properties or Potential Residential Land

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Withholding tax on potential residential land.  My clients, a young couple are onselling a piece of vacant residential land purchased off the plan.  They are not registered for GST.  Pre 1st July this sale would have not normally attracted GST,.  If the purchaser withheld 1/11th of the purchase price, my clients have no way of claiming it back as they do not submit BAS statements.  I cannot find anywhere on the ATO website that this would be an exce exemption to the rule.  ATO said that their vacant residential land they are selling is not a taxable supply and therefore the withholding provisions do not apply but I cant get anything in writing nor find any evidence to support his advice.  Im not having much luck with their accountant either.  Can anyone please clarify this for me?  

 

Thank you.

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Hi @Jen_MPC,

 

Thanks for your patience whilst we received specialist information regarding your query!

 

Our GST Ruling 2003/3: When is a sale of real property a sale of new residential premises? provides information that may assist vendor’s with their obligations when selling land. GSTR 2003/3 paragraph 22 states:


A supply of residential premises by way of sale is a taxable supply where all the following conditions are met:

  • the residential premises are new residential premises as defined in section 40-75
  • the new residential premises were not used for residential accommodation before 2 December 1998
  • the supply is made for consideration
  • the supply is made in the course or furtherance of an enterprise that the vendor carries on
  • the residential premises are in Australia; and
  • the vendor is registered, or required to be registered.

From the information you've provided it doesn't appear that your client would satisfy all of these conditions, in particular the fourth and sixth conditions above. With the information provided, the client doesn't appear to be carrying on an enterprise and isn't registered or required to be registered for GST. The nature of the supply appears to be a mere realisation of an asset.


When selling the potential residential land the clients must provide a written notice to the purchaser before making the supply. This notice must state the purchaser is not required to make payment pursuant to section 14-250 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) in relation to the supply.

 

Thanks, JodieH.

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Best answer

ATO Certified

Community Support

Replies 1

Hi @Jen_MPC,

 

Thanks for your patience whilst we received specialist information regarding your query!

 

Our GST Ruling 2003/3: When is a sale of real property a sale of new residential premises? provides information that may assist vendor’s with their obligations when selling land. GSTR 2003/3 paragraph 22 states:


A supply of residential premises by way of sale is a taxable supply where all the following conditions are met:

  • the residential premises are new residential premises as defined in section 40-75
  • the new residential premises were not used for residential accommodation before 2 December 1998
  • the supply is made for consideration
  • the supply is made in the course or furtherance of an enterprise that the vendor carries on
  • the residential premises are in Australia; and
  • the vendor is registered, or required to be registered.

From the information you've provided it doesn't appear that your client would satisfy all of these conditions, in particular the fourth and sixth conditions above. With the information provided, the client doesn't appear to be carrying on an enterprise and isn't registered or required to be registered for GST. The nature of the supply appears to be a mere realisation of an asset.


When selling the potential residential land the clients must provide a written notice to the purchaser before making the supply. This notice must state the purchaser is not required to make payment pursuant to section 14-250 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) in relation to the supply.

 

Thanks, JodieH.

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Thank you @JodieH !!

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