Federal Budget 2017: How proposed changes will impact developer cash flow and lender security

The Budget included a controversial plan to shift the responsibility of remitting GST on new residential sales from property developers to purchasers. Under the proposal, purchasers settling sales after 1 July 2018 will be liable to pay the GST on the sale directly to the Australian Taxation Office (ATO). The exact process, and implications for existing pre-sales contracts, is unclear.

There is no doubt the change will have a negative impact on developers' cash flows. BRI Ferrier believes that the cash flow impact will be felt for up to 50-days depending on the date of settlement.

Lenders may face a significant change

Here is how it works now:

• Developers claim GST refunds on expenses during the course of a development.