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Foreign resident capital gains withholding payments*

Posted in Conveyancing and Property Law on 20 July 2017

Foreign resident capital gains withholding payments*
From 1 July 2016, the tax legislation has provided that purchasers of real property for $2m, or more, must withhold 10% of the purchase price and remit that sum to the Australian Taxation Office (ATO), unless the vendor can produce at settlement a “clearance certificate”. The stated intention of this amendment was to capture capital gains tax (CGT) which was apparently not being paid by a significant number of foreign nationals who sold real estate in Australia for profits that would normally be subject to CGT. In the May Budget, the Federal Government announced that this limit would be reduced to $750,000 from 1 July 2017. Accordingly, the purchaser of any real property for $750,000, or more, must remit 10% of the purchase price to the ATO at settlement. However, there are two exceptions: (1) If the vendor produces a clearance certificate at settlement, the purchaser need not remit the 10% to the ATO. A clearance certificate can be obtained fairly easily by an Australian resident taxpayer upon application to the ATO, either directly or via one’s accountant; or (2) If the transfer is between spouses (which includes de facto spouses, either the same or different sex) and is “under the Family Law Act 1975 or under a State law, Territory law or foreign law relating to breakdown of relationships between spouses”. The definition of a spouse is contained in subsection 995-1 (1) of the Income Tax Assessment Act 1997. Therefore, you consider the following: necessary clearance certificate. to your accountant and advise that the exemption is claimed as a result of the breakdown of a relationship and pursuant to an order, agreement or award. There is no need to apply direct to the ATO for an exemption;
  • If you are selling real property for $750,000, or more, you should be aware of these provisions and obtain the
  • If there is a transfer between spouses of a property worth $750,000, or more, you should report the transaction

For all Family Law client - this is yet another good
reason why you should have an agreement ratified by either a consent
order or a financial agreement.

To claim the exemption, it is necessary for the transfer
between spouses to be “as a result of an order, agreement or
award” (see para 4 of Variation 51).

*source: Law
Council of Australia 19.07.17