- If the contract says the margin scheme applies, make sure it does by asking questions.
- GST withholding is calculated on the price, not the settlement amount.
- Hopefully the ATO will soon issue a ruling on how the penalties will apply.
You are acting for Charlie and Chloe, new clients who left their former solicitor because, they say, he ‘stuffed up badly about GST’ on previous transactions. Chloe is clearly the spokesperson.
Now they want you to act for them on the purchase for $100,000 of a vacant block of land on which they plan to build their dream home.
The contract says the sale is a taxable supply, that the margin scheme applies, and that the withholding amount is $7,000.
You know about GST withholding on the sale of new residential premises, but so far not vacant land. Initially you assume it is all covered by the A New Tax System (Goods and Services Tax) Act 1999 (‘GST Act’) but ultimately locate the withholding provisions in schedule 1 to the Taxation Administration Act 1953 (‘TAA Act’).
You eventually find section 14-250 which applies GST withholding if the land is ‘potential residential land’.