Changes for Property Sales
From 1 July 2016, vendors who sell property for a contract price $2 million or more will be affected by amendments to the Tax and Superannuation laws Amendment (2015 Measures No. 6) Act 2016.
The amendments require that where an Australian resident sells a property for $2 million or more, the vendor must provide the buyer with a Foreign Resident Capital Gains Withholding Clearance Certificate (‘a Clearance Certificate’). Without the Clearance Certificate, the buyer is required to withhold 10% of the purchase price and pay this to the ATO. This applies to:
- both commercial and residential property sales whether built on or vacant;
- mining and prospecting rights; and
- indirect interests, such as the sale of shares in a company that owns Australian real estate.
The new measures are intended to ensure that foreign residents comply with their potential Capital Gains Tax liabilities. Foreign residents may be either those persons not domiciled in Australia or present for more than half the financial year prior to the sale, or companies not incorporated or carrying on a business in Australia where the company’s central management is outside Australian territory.
All vendors will need to comply with the new requirements and provide a Clearance Certificate to a buyer, regardless of whether they are considered a foreign resident. Foreign residents are able to apply to the ATO and seek reductions in the 10% withholding payment In appropriate cases. Australian residents will automatically be issued with the Clearance Certificate, however do have to apply. Penalties apply to both vendors and buyers, making the changes significant for both parties. The penalty for buyers failing to withhold is equal to the 10% required to be paid to the ATO.
For further information, please contact Tammy Wills, Solicitor on 07 5444 4750 or [email protected]