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.
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.