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Australia Warns On Real Estate GST Non-Compliance

by Mary Swire,, Hong Kong

14 March 2019

The Australian Taxation Office said that it has noticed a number of common errors being made in activity statements since the "goods and services tax at settlement" system was introduced for the real estate industry in July 2018.

As of July 1, 2018, purchasers of new residential premises and new residential subdivisions are required to withhold GST on the purchase price at settlement and then pay it directly to the ATO. The legislation is intended to prevent tax evasion by property developers who fail to remit GST on sales of such property, a practice often associated with illegal phoenixing activity.

The ATO advised tax agents and their clients to ensure that they understand the reporting requirements and that they are correctly completing activity statements when reporting property sale information.

The ATO explained that the new law does not affect a supplier's obligation to lodge their activity statement and to report their GST liabilities on taxable supplies.

The ATO said that agents should remind their clients to report property sales in the activity statement period in which settlement occurred. This should be reported on a business activity statement (BAS) at label G1, "Total sales," and at label 1A, "GST on sales". In addition, at label 1B, "GST on purchases", the agent or their client must report the total amount of GST credits (including any adjustments) the supplier of the property is eligible to claim. They should not report GST that has been withheld at settlement and paid to the ATO by the purchaser.

The ATO added that if an agent or their client has made an error on an activity statement, including incorrectly reporting or omitting property sale information, they or their client must correct the statement to avoid potential penalties.

TAGS: compliance | tax | business | tax compliance | tax avoidance | revenue guidance | law | real-estate | goods and services tax (GST) | Australia | legislation | penalties | services | Tax | Tax Evasion

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