Foreign Resident Capital Gains Withholding Payments

June 1, 2016

As of 1 July 2016 all purchasers will be required to pay 10% of the purchase price of their property to the ATO if the vendor is a foreign resident.

 

This legislation aims to assist in the collection of Capital Gains Tax (“CGT”) from foreign vendors where there is currently poor compliance in regards to tax collection. In this way, the purchaser is essentially ‘helping’ the ATO to collect CGT.

 

The ATO lists the following assets as being affected:

 

  • Real property in Australia – land, buildings, residential and commercial property;

  • Lease premiums paid for the grant of a lease over real property in Australia;

  • Mining, quarrying or prospecting rights;

  • Interests in Australian entities whose majority assets consist of the above such property or interests – this is called an indirect interest;

  • Options or rights to acquire the above property or interest.

 

An exclusion of note is all properties with a value under $2 million which means most residential house sales will be unaffected.

 

There are also cases where a ‘clearance certificate’ may be applied for from the ATO where the 10% withholding will not be required. For more information on whether a clearance certificate may apply to you as well as how these changes will be implemented visit:

 

https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Foreign-resident-capital-gains-withholding-payments/

 

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