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If you are selling property over $2 million - New Rules

If you are selling property over $2 million - New Rules

  • Sunday, 03 July 2016 02:35

The government is strengthening its foreign resident capital gains tax (CGT) regime to assist in the collection of foreign residents' CGT liabilities.

The new withholding regime will apply to contracts entered into on or after 1 July 2016. Australian residents selling real estate with a market value of $2 million or more will need to apply for a clearance certificate from the Australian Taxation Office (ATO) to ensure amounts are not withheld from the sale proceeds. Where a valid clearance certificate is not provided by settlement, the purchaser is required to withhold 10% of the purchase price and pay this to the ATO. 

SELLING PROPERTY WITH A MARKET VALUE OF $2 MILLION OR ABOVE 

Australian residents need to obtain a clearance certificate from the ATO prior to settlement to avoid the 10% non-final withholding tax, and, provide it to the purchaser prior to settlement. Foreign residents may apply to the ATO for a variation to the 10% non-final withholding tax, and provide this variation notice to the purchaser prior to settlement. Vendors can claim a credit for the withholding amount paid to the ATO against the final tax assessed in their income tax return.house

PURCHASING PROPERTY WITH A MARKET VALUE OF $2 MILLION OR ABOVE

You will be required to withhold 10% of the purchase price and pay it to the ATO unless the seller provides you with a clearance certificate. You may vary down the 10% non-final withholding tax if the seller has received a variation notice from us and provided it you prior to settlement. Purchasers must pay the amount withheld at settlement to the ATO.

 

Let us advise you with your accounting and taxation needs!