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
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
- 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).