Who is responsible to pay GST - the buyer or seller?

When it comes to selling property, there are various financial considerations that both sellers and buyers need to be aware of. One significant aspect is Goods and Services Tax (GST) and understanding who is responsible for its payment during a property transaction.

It's a common misconception that GST is only applicable to commercial transactions. However, in Australia, GST can also come into play in certain residential property sales, particularly in the case of new or substantially renovated properties.

So, who is responsible for paying GST when a property is sold? The answer lies in understanding the intricacies of property contracts and GST regulations.

First and foremost, it's crucial to note that unless otherwise specified in a Residential Contract of Sale, all prices include GST. This means that when negotiating a sale price, sellers must clearly indicate whether GST is included or excluded from the price. This can be achieved by adding "+ GST" to the price, ensuring clarity for all parties involved.

In the event that GST is not explicitly added to the purchase price, sellers should still be aware that they may be obligated to pay GST if applicable. This obligation stems from section 14-250 of the withholding law, which mandates that sellers disclose to buyers the potential requirement for GST payment to the Australian Taxation Office (ATO). This disclosure is particularly pertinent in transactions involving proposed lots or house and land contracts.

In practical terms, if a property sale triggers the requirement for GST payment, the seller must ensure proper disclosure to the buyer. Failure to do so can lead to complications and legal issues down the line. Additionally, if the buyer is required to make a payment under the withholding law, their representative should furnish them with a copy of the GST payment for their records.

It's worth noting that navigating GST obligations in property transactions can be complex, and seeking professional advice from tax experts or legal professionals is often advisable. By understanding and adhering to the relevant regulations, both sellers and buyers can ensure a smooth and legally compliant property sale process.

While GST responsibilities in property sales may vary depending on the circumstances, clear communication and proper disclosure are essential for all parties involved. By staying informed and seeking expert guidance when needed, sellers and buyers can navigate GST obligations effectively and mitigate potential risks associated with non-compliance.

Thank you to Rebecca Petroff from Sunstate Conveyancing for sharing this very important information with us.