Lowered Withholding Tax Threshold Affects More Property Sales
As of 1st of July, 2017 there are new tax rules for property sales in Australia.
Australian residents buying or selling real property with a market value of $750, 000 or more (previously $2 million) will be impacted by this.
According to the ATO, the seller needs to provide a clearance certificate to the buyer by settlement, or the buyer will be required to withhold 12.5% (previously 10%) of the sales price and pay this to the ATO.
If you are looking to sell property with a value of $750, 000 or more, you need to apply for a clearance certificate as early as possible.
This form is available to download through the ATO website (click here). There is no fee for clearance certificate applications.
Clearance certificates are valid for 12 months from issue, and must be valid at the time it is made available to the buyer. Penalties apply where sellers make false or misleading declarations to the ATO, or where the buyer fails to withhold when they should.
The new rules have been introduced to ensure foreign residents meet their capital gains tax liabilities. Accountants have advised us that amounts withheld will be credited against the Vendors final income tax liability assessed on foreign residents’ income tax returns.
Many vendors are not aware of the change of tax rules and lowering of the capital gains withholding threshold and still believe it is for properties above $2 million.
If the form is not contained within the Vendors Statement, your solicitor will source a copy prior to settlement on your behalf. If one is not provided then monies will be held by the tax office until the vendor advises the tax office of their status.
For independent advice on buying or selling real estate, contact Janet Spencer at Buyer Solutions +61 3 9816 8555 or email jspencer@buyersolutions.com.au
+61 39816 8555