Property Insights - foreign resident capital gains withholding changes

12-Jul-2017
Foreign resident capital gains withholding changes
From 1 July 2017, changes to foreign resident capital gains withholding (FRCGW) regime have taken effect.

Where there is a disposal of taxable Australian real property with a market value of $750,000 or more including vacant land, buildings, residential and commercial property, or a grant of a lease over real property in Australia the purchaser will be required to withhold 12.5% of the purchase price and pay it to the Australian Taxation Office unless the purchaser has been provided with an ATO-issued clearance certificate.

Prior to 1 July 2017 this regime applied to taxable Australian real property with a market value of $2million and the withholding rate was 10% of the purchase price. The change the threshold market value will mean that many more disposals will be subject to the regime.

The previous threshold and rate will apply for any contracts that are entered into from 1 July 2016 and before 1 July 2017, even if they are not due to settle until after 1 July 2017.

All property transactions with a market value of $750,000 or more will need the vendor and purchaser to consider if they need a clearance certificate.

What you need to do if you selling property after 1 July 2017

If you are Australian resident seller you should obtain a clearance certificate from the ATO and provide it to the buyer or buyer’s representative prior to settlement (certificates are valid for 12 months). You can make this application online through the ATO website.

If an asset has multiple sellers, each seller will need to supply the buyer with a clearance certificate to ensure amounts are not withheld.

If you are unsure about the purchase price because the property is going to auction or set date sale, you should consider obtaining the clearance certificate if the purchase price is likely to reach $750,000 and you are an Australian resident which will need to be provided before settlement to the buyer.

Foreign Residents should consider how the resident capital gains withholding (FRCGW) regime applies to them, and speak to their advisers about any applicable variations or exceptions.

Please speak to your conveyancer or accountant about applying for the clearance certificate from the ATO or any further information which takes into account your financial situation, taxation position or particular needs.

For further information


https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Calculating-a-capital-gain-or-loss/Capital-gains-withholding--Impacts-on-foreign-and-Australian-residents/


The above is general in nature for information purposes only. You should not construe any statements made in this material as investment, tax or legal advice.
Foreign resident capital gains withholding changes