On 1 July 2017, the Federal Government passed changes to the existing Foreign Resident Capital Gains Withholding Tax scheme. These changes have consequences for all sellers and buyers of residential property worth more than $750,000 (even if you are an Australian resident).
The scheme requires buyers of property worth more than $750,000 or more to withhold 12.5% of the purchase price and pay those funds to the ATO following settlement unless the seller provides the buyer with a clearance certificate from the ATO.
When selling a property, Australian residents need to obtain a clearance certificate from the ATO prior to settlement to ensure they do not incur the 12.5% non-final withholding. It is important that this certificate is obtained for each owner as soon as possible to avoid any delays in settlement. An application for a clearance certificate can be made to the ATO at: https://www.ato.gov.au/FRWT_Certificate.aspx
Clearance certificates are free of charge and are valid for 12 months.
If a buyer does not receive a clearance certificate from the seller and fails to pay 12.5% of the purchase price to the ATO, the buyer will become personally liable to pay this amount as a penalty.
If you have questions regarding the Foreign Resident Capital Gains Withholding scheme, get in touch with MAP Lawyers today! Speak to a trusted conveyancing lawyer by calling 1300 680 584 or emailing email@example.com