July 31, 2017 Rebecca Mackie

UPDATE – Withholding tax on property sales

Rebecca Mackie

Rebecca Mackie

Partner
Rebecca Mackie has extensive experience dealing with tax and structuring advice for property investors and developers.

Last year we wrote an article detailing the new withholding tax introduced for properties sold to foreign residents.  For any property sold for more than $2 million after 1 July 2016, the purchaser had an obligation to withhold 10% of the sale price.  If the vendor was an Australian resident they had to provide a “Clearance Certificate”, issued by the ATO, to the purchaser to prove their residency and stop the purchaser withholding 10% of the purchase price and remitting to the ATO.

As of 1 July these thresholds and amounts have changed.  Purchasers now need to withhold 12.5% of all property sale prices over $750,000.  Considering the average price of real estate in Australia at the moment, this is going to impact a significant number of property buyers and burden them with this additional administrative process.

Clearance certificates are specific to a particular entity and are valid for 12 months. To avoid settlement complications or delays the ATO are urging Vendors to obtain a clearance certificate when they first consider selling their property. The certificate is not linked to a particular asset and can apply to multiple transactions within that 12 months.

Where a Vendor is a foreign resident, they can apply to the ATO for a variation notice which may reduce the required withholding amount. A foreign resident should apply for a variation notice as early as possible as it can take up to 28 days for the variation decision to issue.

The purpose of a clearance certificate is to show the ATO there is no withholding obligation. The clearance certificate should be obtained by the registered owner that appears on the title.

Purchasers will face a penalty if they do not withhold what they should, and they may be liable for the 12.5% withholding tax if they cannot produce a Clearance Certificate.  If you have any questions please talk to your Agent, Conveyancer or give us a call.

A link to the ATO Clearance Certificate can be found here: https://www.ato.gov.au/FRWT_Certificate.aspx

Rebecca Mackie, Partner, Paris Financial

Follow me on Twitter

Image courtesy of suphakit73 at FreeDigitalPhotos.net

 

, , ,
Rebecca Mackie

Rebecca Mackie

Partner
Rebecca Mackie has extensive experience dealing with tax and structuring advice for property investors and developers.

Thank you for providing your email address. You’re now connected with our Small Business Tax Champions.

Do you want insight into the latest tax news and cutting-edge financial advice?

*Required field