Legislation to increase red tape for lawyers and conveyancers
GlobalX has warned that proposed changes to the laws around property transactions will be a burden for lawyers and conveyancers.
Proposed legislative changes would see lawyers and conveyancers become the “tax collectors” in property settlements, according to legal software provider GlobalX, which specialises in property.
The changes, announced in the 2017 federal budget, would come into force on 1 July 2018 and would force property buyers to pay the GST on their purchase price directly to the tax office as part of the settlement process.
The move is intended to combat illegal phoenix activity, but GlobalX CEO Peter Maloney (pictured) said it will also create an additional compliance burden for buyers and the legal professionals conducting the settlement.
“The settlement process can be a stressful time for many buyers and these changes will add further, unnecessary pressures that will only benefit the ATO,” Mr Maloney said.
“Instead of adding more red tape, we should be seeking ways to reduce the already cumbersome process consumers face when buying and transacting property.”
Mr Maloney said the developers would have to notify buyers of the withholding requirement at least 14 days before the transaction takes place, and that they could face penalties from the ATO if they fail to do so.
“These changes are the ATO’s attempt to reduce instances of ‘phoenixing’ – where property developers go into liquidation before paying the GST on the sale of new homes over to the ATO – but one-size-fits-all legislative reforms are inappropriate because they penalise the majority for the actions of a minority,” he said.
Gadens partner Matthew Raven said buyers would even need to withhold the GST amount when a contract required the full purchase price to be paid to the seller at settlement.
“Unlike the Foreign Residents Capital Gains Withholding regime, which was introduced earlier this year, there is no ability for developers to obtain an ATO clearance, meaning all sales will be affected once the change is enacted,” Mr Raven said.
“While phoenixing is estimated to cost the Australian economy more than $3 billion a year, this proposed solution essentially sees lawyers, conveyancers and purchasers taking on the role of tax collector.
“We expect this announcement – once it is more widely understood – will ruffle a few feathers within the legal sector of those trying to streamline the settlement process rather than complicate it further.”
Pictured: GlobalX CEO Peter Maloney