The Federal Government has released exposure draft legislation for proposed changes to the Goods and Services Tax (GST) rules applying to the sale of new residential premises (and certain types of land).

The main change proposed is that GST on relevant sales of new residential premises and potential residential land will be paid not by the vendor in accordance with the usual GST rules. Instead, the GST will be paid by the purchaser. This represents a significant variation to the usual scheme of GST.

Main points

  • The purchaser will carry the liability for paying GST on sale of new residential premises and potential residential land.
  • The vendor will have new notification obligations to inform purchaser of the GST rules.
  • The new rules may also apply to the transfer of vacant land from one developer to another.
  • The changes apply from 1 July 2018.

Land affected by change

The new rules apply where there is a taxable supply comprising or including:

  • new residential premises; or
  • potential residential land (vacant land on which residential development may occur).

Time for payment

The relevant GST must be paid on or before the day on which any of the consideration for the supply is first provided (usually this will be completion of a sale). Payment of the deposit does not trigger the relevant obligations. This position may be varied if the Commissioner makes a determination by legislative instrument.

How much GST?

The amount to be paid to the Commissioner is effectively 10%, that is, 1/11th of the total amount paid for the supply. This applies even where it is a supply of new residential premises under the margin scheme where the actual amount of GST might be less than 10%. However, there may be a refund available to the vendor in respect of overpaid amounts where the margin scheme applies (explained further below).

Where the supply includes things other than new residential premises or potential residential land, an apportionment applies.

Notification obligations

The proposed new rules also include notification obligations on the part of the vendor. Vendors must, at least 14 days before making the supply (usually completion), give to the purchaser a written notice. This notice must among other things state whether the purchaser will be required to reverse charge the GST. It must also provide the vendor's details including ABN and the amount required to be paid as GST, as well as when the amount must be paid. Failure to comply is an offence.

Refunds and credits

Where the amount of GST applicable is less than 10% (for example, where the margin scheme applies), if 10% is paid to the ATO, there is provision for a refund of the overpaid amount. The application for refund must be made no later than 14 days before the day on which GST is payable on the supply. Usually this will be the date of completion. Where the vendor returns GST monthly, no refund of GST applies but a credit for the full amount of GST may be claimed.

Rules for a refund also apply in the case of error.

There is no time stipulation as to when the refunds will be available.


There are certain exclusions from the new rules including intra-group supplies and certain supplies by joint venture operators of a GST joint venture to another entity that is a participant.

What purchasers are affected?

The rules are applicable both to unregistered entities (such as a domestic consumer of a new home) as well as to businesses (i.e. GST registered entities). For example, if a developer sells potential residential land to another developer, even though both developers may be registered for GST, the liability is shifted to the purchasing developer.

In such business-to-business circumstances, a purchaser entity (if GST registered) may wish to seek an input tax credit (i.e. a refund) in respect of the GST it remitted. There are practical concerns as to how the standard input tax credit system would apply to the purchaser in these case. For instance, whether a vendor would still be required to issue a tax invoice to the purchaser.


It is understood that the new rules are expected to commence with effect from 1 July 2018.

The exposure draft provides for transitional rules. The new rules will apply to any supplies for which any of the consideration (other than the deposit) is first provided on or after 1 July 2018. This applies whether or not the contract for supply was entered into on or after the start date for the changes. However, if a contract was entered into before 1 July 2018, the new rules do not apply if consideration for the supply other than the deposit was first provided before 1 July 2020. This means that a contract for an off-the-plan sale entered into before 1 July 2018 will not be brought within the new rules unless completion occurs on or after 1 July 2020. There is also transitional relief for certain existing property development projects.


Developers will need to consider what amendments need to be made to new contracts for sale to deal with these changes. For example, to the extent that new notification obligations arise, consideration needs to be given as to whether the contract itself should deal with the matter and whether a separate form of notification would be created. Further, contracts should ideally provide that purchasers should assist vendors as needed, in claiming refunds or credits.


Treasury will accept comments on the exposure draft legislation until 20 November 2017.

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