Tax reforms to affect real estate transactions involving foreign residents: Settlement agents bulletin issue 56 (June 2016)
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29 June 2016
From 1 July 2016, sellers of real estate with a market value of $2 million or more will need to apply for a clearance certificate from the Australian Taxation Office (ATO) in order to receive all proceeds of the sale.
This follows the introduction of new taxation legislation which imposes a ten percent withholding tax on foreign residents selling property of this value.
The ATO will issue clearance certificates to sellers who are classed as an Australian tax resident in relation to the transaction.
The buyer is required to withhold ten percent of the purchase price and pay it to the ATO if the seller fails to provide a valid clearance certificate on or before settlement.
The real estate industry has been informed the withholding payment would be considered a material fact which needs to be conveyed to affected sellers and buyers by their real estate agent or sales representative.
It is important settlement agents also inform of the reform in cases where a property is sold for $2 million or more and no clearance certificate is provided.
Buyers will also have to be advised of their responsibilities in cases where clearance certificates are not presented on or before settlement.
Additional information on the Foreign resident capital gains withholding payment is available on the ATO’s website.
The Department understands the ATO is developing an information package specifically for settlement agents, which will be available on its website shortly.
Should your clients dispute the information you provide or have queries in relation to the process, they may wish to contact the ATO.
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