Source: Australian Property Journal
In January 2018 the Government introduced legislation designed to strengthen compliance with GST law in the property development sector.
Under the new arrangements, purchasers will withhold the GST on the purchase price of new residential premises and new residential subdivisions, and remit the GST directly to the Australian Taxation Office (ATO) as part of settlement.
The purpose is to address GST tax evasion while minimising compliance impacts on industry and purchasers. The change forms part of the Treasury Laws Amendment (2018 Measures No.1) Bill).
The measure has a two-year transitional arrangement to provide certainty for existing contracts. Contracts entered into before 1 July 2018 will not be affected by this change as long as the transaction settles before 1 July 2020.
Members providing valuations of new residential premises and new residential subdivisions are reminded of Section 210 of IVS 104 Bases of Value (IVS 2017) which covers 'transaction costs' and states:
"Most bases of value represent the estimated exchange price of an asset without regard to the seller's costs of sale or the buyer's costs of purchase and without adjustment for any taxes payable by either party as a direct result of the transaction."
This does not mean that the effect of such costs and taxes on market participants and their decision to buy, sell or finance has to be ignored, only that the market value reported is the price that would be agreed in the transaction, not the nett receipt that would be received by the seller or the gross cost that would be incurred by the buyer, as a result of the transaction.
The transaction costs for real property can be significant. They do affect the pricing decisions of market participants and should be considered when analysing market data and in the valuation methods adopted.
This means that you get the 'real' valuation of your real estate with no hidden agendas.