What is it and how can it affect you?
Earlier this year, the Australian Government announced changes to the Foreign Resident Capital Gains Withholding rate and threshold with this applying to all contracts entered into on or after the 1st July 2017. This affects all property sales above $750,000 and the tax rate will be 12.5%.
This law was introduced to target the collection of capital gains from foreign residents. While the law itself doesn’t affect Australian buyers and sellers from a tax perspective, it does affect you if you are selling a property at this price or over. You will have to prove to the Australian Tax Office that you are not a foreign resident. How do you prove this? By obtaining a clearance certificate through your conveyancer or solicitor. If you don’t do this? You’ll be required by law to hold back 12.5% of the purchase price. Obtaining a certificate will take around 2 weeks so your legal rep needs to initiate this process with you early to ensure you’re not disadvantaged at settlement.
The certificate can be applied for online through the ATO. While the process isn’t difficult as such, there is information that needs to be provided including yours as the vendor and also the purchaser’s details along with information regarding your tax situation.
There’s been little press released regarding this so please keep this in mind when you prepare to sell your property in the future.
To learn more or obtain a certificate, please click on the link below: