If you are purchasing a property you are required to obtain a Clearance Certificate from the vendor if the contract price is greater than $750,000.
If you don’t get this Clearance Certificate you are required to withhold 12.5% from the purchase price and remit to the ATO.
If during settlement, this step is overlooked you will still have to pay the 12.5% tax if the vendor is a non-resident and even if the vendor is a resident, there could still be fines and penalties.
The foreign resident vendor may be able to get this tax back when they lodge their tax return at the end of the financial year.
GST on Property Transactions
From 1 July 2018, the Government is looking to strengthen compliance with the GST law by requiring purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the Australian Taxation Office (ATO) as part of settlement.
Under the current law (where the GST is included in the purchase price and the developer remits the GST to the
ATO), some developers are failing to remit the GST to the ATO despite having claimed GST credits on their construction costs.