GST withholding shifts responsibility for paying GST on certain residential supplies from the vendor to the buyer at settlement. It applies to new residential premises and to potential residential land, and the buyer remits the withheld amount directly to the Australian Taxation Office under Subdivision 14-E of Schedule 1 to the Taxation Administration Act 1953 rather than paying it to the vendor.
The contract implements the elections made in the particulars of sale and deals with GST withholding in its GST conditions. The default position is that no additional GST is payable, so the correct election must be made when the contract is entered into, or a party can be left out of pocket. Whether the sale attracts GST at all depends on the general GST rules, which turn on whether the sale is a taxable supply and whether the premises are new.
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The GST election in the particulars drives the outcome, and the default is no additional GST. GST questions are technical, and a ruling from the Australian Taxation Office or advice from an accountant is the right source where the position is unclear.
Law referenced: A New Tax System (Goods and Services Tax) Act 1999; Taxation Administration Act 1953 sch 1 subdiv 14-E.