On and from 1 July 2016, new laws commence that implement 10% capital gains withholding payments on the sale of taxable property in Australia, which of course includes real property.
The purpose of the new laws is to assist the Australian Government in securing payment of capital gains tax from foreign residents.
In simple terms, when a foreign resident disposes of real property in Australia with a market value of $2million or more, the purchaser must withhold 10% of the purchase price and remit same to the Australian Taxation Office (ATO).
The new regime applies to contracts for the sale of land entered into on and from 1 July 2016.
All Australian resident vendors will have to obtain a valid clearance certificate from the ATO prior to settlement of their sale to ensure that the regime does not apply to them. If they fail to do so, then the purchaser must retain the payment and remit same to the ATO.
If a vendor is not eligible for a clearance certificate, they might be able to reduce the amount withheld in certain circumstances by obtaining a variation notice from the ATO. An example might be if the vendor is a foreign resident but they have not made a capital gain by the disposal of the asset.
Significant penalties apply to purchasers who fail to comply with their obligations under the new regime.
For advice in relation to this post or conveyancing in general, do not hesitate to contact the experienced legal professional at Burt & Hanke Legal practising in Albury, Wodonga and surrounding areas.