Are You Selling Property? The Game Has Changed Again!
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Back in February 2017 we reminded owners of properties valued over $2 million that if selling, they would need to obtain a clearance certificate from ATO.
This was because as from 1st July 2016 new rules applied to the selling of certain taxable Australian assets. More particularly, any Seller of real property with a value of $2 million or over would need to obtain a clearance certificate from the ATO prior to the settlement of the Contract. If they did not, then a mandatory 10% of the purchase price had to be withheld and forwarded to the ATO by the Buyer.
This was the new regime put in place by the ATO to ostensibly ensure that foreign investors do not avoid paying capital gains tax.
Please note that as from 1 July 2017 the threshold amount for the sale of real property will be reduced to $750,000. The withholding amount will also increase to 12.5% from this date.
This means that if you enter into a Contract for the sale of property for $750,000 or over, on or after 1 July 2017, a simple Seller declaration that the Seller is not a foreign resident is not sufficient and a clearance certificate must be obtained from the ATO prior to settlement. If it is not, the Buyer is obliged to withhold 12.5% of the purchase price and send this amount to the ATO.
It is also important that the Buyer of real property is also aware of this regime. The reason being is that the obligation to forward the withholding amount to the ATO, if no clearance certificate is available by settlement, falls upon the Buyer. In fact, if the Buyer does not pay this amount when they should, the ATO will hold the Buyer liable for it. ATO has stated on its website that general interest charges will accrue from the date of settlement if they don’t obtain the withholding amount when required.
Should you need any information as to how to obtain this clearance certificate, or have other concerns in regards to the new withholding regime, please contact MMLaw.
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The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.
The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.