This existing withholding tax assists the collection of foreign residents’ Australian tax liabilities. Where a foreign resident sells certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price and pay that amount to the ATO (see our previous article on this topic).
Australian residents selling real property will need to obtain a clearance certificate from the ATO prior to settlement, to ensure they don’t incur the withholding.
The Federal Government is making changes to the foreign resident capital gains withholding rate and threshold, applicable on contracts entered into on or after July 1. Where previously this applied to property transactions more than $2 million, the threshold has been lowered to $750,000, and the withholding tax rate will be increased to 12.5%, from 10%.
If you need advice on an upcoming property transaction, please contact Andrew O’Donnell or myself on (02) 9908 9888 or email angela.boyd@edneyryan.com.au.