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R E I Q J O U R N A L
| J U N E 2 0 1 6
P A G E 8
From 1 July 2016, new
tax rules will apply on
any property transaction
where the market value of
the property is $2 million
and above.
Although the new laws are aimed at
foreign residents, real estate agents
must be aware that these new laws
also impact Australian residents
selling properties above this value.
Summary
The new laws require a purchaser to
withhold 10 per cent of the purchase
price of real property valued at
$2 million or more and to pay that
amount to the Australian Taxation
Office (ATO) on settlement unless the
seller obtains a clearance certificate.
The new laws will start on 1 July
2016 and are aimed at vendors who
are ‘foreign persons’. However, it
will impact all property transactions
valued $2 million and over,
irrespective of whether the vendor is
a foreign person or not.
For any sale contract entered into
on or after 1 July 2016 where the
purchase price is $2 million or
greater, the purchaser has a statutory
obligation to withhold 10 per cent
of the purchase price at settlement
from the vendor and pay that amount
to the ATO. Following settlement,
the vendor applies for a tax credit in
relation to the amount withheld by
the ATO for the capital gains liability
arising from the transaction.
This means that Australian resident
vendors who are selling property
with a market value of $2 million
or above will need to apply for a
clearance certificate from the ATO
to ensure that their sale proceeds
are not withheld.
How can your clients obtain a
clearance certificate?
The ATO will only issue a clearance
certificate to a vendor that is not a
‘foreign person’ for taxation purposes.
Any vendor that is not a foreign
person can apply online for a
clearance certificate from the ATO,
and that certificate will remain
valid for 12 months from the date of
issue. The certificate may be used for
multiple property sales within the
12-month period.
If a valid clearance certificate is
provided to the purchaser prior to
settlement, the purchaser is not
entitled to withhold 10 per cent of
the purchase price at settlement
and the full sale proceeds are to be
released to the vendor.
New withholding tax rules
for $2m-plus properties