The Federal Government has introduced legislation (to apply from 1 July 2016) which requires the purchaser of an Australian property to withhold 10% of the purchase price at settlement and pay this amount to the Australian Taxation Office (ATO). Whilst the withholding amount is designed to cover a “foreign resident” vendor’s potential capital gains tax liability, the legislation will apply to all property transactions unless an exception is applied (see below). A foreign resident can be both an individual or a company.
The purchaser’s obligation to withhold the 10% amount will NOT apply where:
(a) The market value of the asset is less than $2m; or
(b) A clearance certificate has been obtained from the ATO by the vendor and provided to the purchaser BEFORE settlement; or
(c) The transaction is conducted through an approved stock exchange; or
(d) The transaction is a securities lending arrangement; or
(e) The amount is already required to be withheld as withholding tax for some other reason; or
(f) The vendor is under external administration or in bankruptcy
It is important to note it is the PURCHASER’S RESPONSIBILITY to withhold and remit the funds. If the purchaser fails to withhold and remit, the purchaser can be subject to a penalty equal to the CGT amount which should have been withheld.
The Hoffman Kelly Team
Should you have any queries, please don’t hesitate to contact our office on 07 3394 2311.