On 28 March 2018, the Federal Parliament passed the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 introducing the new Residential Withholding Payment scheme (RW Scheme). This means that from 1 July 2018, purchasers of ‘new residential premises’ or ‘potential residential land’ attracting the RW Scheme must withhold the GST amount of any purchase and pay it directly to the ATO at settlement.
The RW Scheme is a departure from the previous position where purchasers paid the GST amount to vendors at settlement, and vendors passed that amount on to the ATO quarterly via their Business Activity Statements (BAS). The measure is an attempt by the ATO to combat the practice of some businesses intentionally dissolving before their next BAS is due to dodge their GST liabilities (a practice known as “phoenix-ing”).
Under the RW Scheme, vendors must be sure to notify purchasers of their obligations to withhold on applicable purchases. Likewise, purchasers must be sure to comply with their obligations to withhold. Both parties face significant penalties for failing to comply with their obligations under the RW Scheme.
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