Buying a new property is about to cost more, this is why

first_imgBuyers of new properties may be hit with higher conveyancing costs.CONVEYANCING costs are about to become more expensive for those who decide to purchase a new home in Queensland.Under new federal laws buyers of new properties would now have to ensure that the GST owed (on the property purchased) by the developer of the project, was paid to the Australian Taxation Office.The Queensland Law Society has already alerted its members about the changes, which came into effect on July 1, and warns it means higher conveyancing costs for buyers.Real Estate Institute of Queensland CEO Antonia Mercorella said once again the ATO was farming out its responsibilities for tax collection.“It’s the everyday person in the street who bears the brunt of this legislation, which is largely a measure targeting developers,’’ she said.REIQ CEO Antonia Mercorella is concerned that buyers will end up spending more on conveyancing.“It adds a level of red tape to the property transaction and the buyers will be faced with additional conveyancing procedures, which, of course, means additional costs.’’Queensland Law Society Property Law committee Chair, Matt Raven, said the situation came about because the ATO was concerned it had been missing out on GST revenue it was owed by developers.“Some developers in the past have completed developments, settled the sales of all their apartments, disposed of all the money or paid it back to the bank and what have you, and then wound the company up without doing their final GST returns,’’ he said.“That is called phoenixing, the company disappears in a puff of smoke with all these debts owing.’’“So the gist of the new law is that now effectively the GST or an estimate of the GST has got to be collected and accounted to the ATO on settlement on each sale. So the way they have done that is they have put the obligation on the buyer to withhold a proportion of the purchase price.“So the buyer has to basically not pay that proportion to the seller at settlement and have to account to the ATO for it.’’Queensland Law Society president Ken Taylor said the move was effectively making solicitors tax collectors.Queensland Law Society president Ken Taylor was concerned it had added another step to conveyancing and said buyers would be the ones who had to pay for this extra work.More from newsNew apartments released at idyllic retirement community Samford Grove Presented by Parks and wildlife the new lust-haves post coronavirus17 hours agoMr Taylor said the move was effectively making solicitors tax collectors.Residential contracts will now have an additional step added to them in relation to the GST and Mr Taylor said solicitors acting for buyers would have to assess whether a client must withhold GST and make a payment to the ATO.The process also involved completing two online forms which had to be lodged with the ATO.These extra steps would add to the time it took to do property conveyancing and therefore there would be additional costs, Mr Taylor said.While the organisation made submissions on the legislation and raised concerns about it Mr Taylor said it had still proceeded.“It is disappointing that we have seen multiple additional administrative duties added to our profession over recent years by both the State and Federal Governments,’’ he said.The new legislation does not apply to existing properties.Ms Mercorella said the REIQ had received significant feedback from members that the changes had not been clearly explained by the ATO.EVERYTHING YOU NEED TO KNOW ABOUT JULY 1 PROPERTY CHANGES“We have produced extensive materials on the issue to educate our membership, including video content, in-room sessions and written material. There has been minimal education rolled out by the ATO, and yet again industry gets left to do the educating. It’s not a real estate agent’s role to give tax advice and yet consumers often expect the agents to be experts on all matters relating to property sale,’’ she said.Ms Mercorella said this was another impost put on the industry.“This GST-withholding legislation follows similar legislative changes in the foreign-buyer space where the ATO has made the assumption that buyers of property valued at $750,000 or more are foreign and required to pay capital gains tax, unless they could produce a clearance certificate to attest otherwise,’’ she said.“With that particular legislation, the threshold started at $2 million and then made a significant leap to the $750,000 threshold which means it has gone from affecting a small group to almost affecting the majority of property transactions. Where will it end?’’last_img