From 1 July 2016, a 10% non-final withholding tax will apply when selling Australian property with a market value of $2,000,000 or above, unless a clearance certificate is obtained from the Australian Taxation Office (“ATO”).
So how does this affect me?
When selling property with a market value of $2,000,000 or above:
- Australian Residents – need to obtain a clearance certificate from the ATO and provide it to the purchaser prior to settlement;
- Foreign Residents – may apply to the ATO for a variation to the 10% non-final withholding tax and provide this notice to the purchaser prior to settlement. The amount remitted to the ATO will be allowed as a credit against tax assessed on that year’s tax return.
When purchasing property with a market value of $2,000,000 or above:
- Purchasers will need to withhold 10% of the purchase price and pay it to the ATO unless the seller provides the purchaser with a clearance certificate;
- Foreign residents may vary down the 10% non-final withholding tax if the vendor provides the foreign resident with a variation notice from the ATO prior to settlement.
The new contract for sale and purchase of sale of land now available in electronic form, approved by the Law Society of NSW and the Real Estate Institute of NSW provides for Australian resident vendors of property with a market value of $2,000,000 will need to apply for a clearance certificate from the ATO and provide this to the purchaser before completion. Without a clearance certificate, the purchaser is obliged to withhold 10% of the purchase price on completion and remit this amount to the ATO. To obtain a clearance certificate from the ATO the vendor or the vendor’s agent completes an application form online.
The new contract for sale for the purchase of land provides for a number of new obligations required by this measure, such as the purchaser’s obligations to register with the ATO, draw a settlement cheque in completion for the withholding amount, and forward this immediately to the ATO following completion. To encourage parties to deal with the withholding obligation well before completion, the new contract also provides that the purchaser does not have to complete earlier than 7 days after receipt of any clearance certificate or variation from the ATO.
The new contract allows the purchaser to withhold any required withholding amount from the balance purchase money that would otherwise be paid to the vendor on completion.
For more information or advice concerning property and conveyancing, contact the experienced team at Rockliffs Lawyers today.