ATO changes to the foreign resident capital gains withholding: Settlement agents bulletin Issue 70 (June 2017)
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23 June 2017
Impact on property sales of $750,000 or more
On 1 July 2017, the proposed changes to the Foreign Resident Capital Gains Withholding (FRCGW) rate and threshold will take effect.
These changes will apply to contracts entered into on, or after 1 July 2017 for real property disposals where the contract price is $750,000 and above. The FRCGW tax rate will also change from the existing rate of 10% to 12.5%.
The existing $2 million threshold and 10% rate will still apply for any contracts entered into before 1 July 2017 even if they are not due to settle until after 1 July 2017.
The change to the threshold from $2 million to $750,000 will result in many more properties requiring a clearance certificate for exemption of the withholding. The Australian Taxation Office (ATO) can only grant clearance certificates to a seller who is an Australian resident.
Australian resident sellers of real property with a market value of $750,000 or above must apply for a clearance certificate to ensure no funds are withheld from their sale proceeds.
Important: If the seller does not provide the clearance certificate before the settlement of the transaction the purchaser will be required to withhold 12.5% of the purchase price and pay this to the ATO.
Further information and the Foreign resident capital gains clearance withholding certificate application form can be obtained by visiting the ATO website.
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