Are you buying or selling a house, farming land or commercial property?

Talk to your accountant now!

Recent changes to taxation laws mean that anyone purchasing or selling property may have an obligation to withhold tax, or find that they have tax withheld from their settlement proceeds!

The ‘Foreign Resident Capital Gains Withholding’ regime has been in place since 1 July 2016 for property purchases and sales of $2 million or more, however changes to the property value threshold from 1 July 2017 mean this regime now applies to any property transactions of $750,000 or more.

The name of the regime is misleading in a couple ways:

  • It applies to everyone – not just foreign residents, don’t be fooled
  • It doesn’t apply just to capital gains tax assets – this applies to all Australian property, including your home

The key points of the regime are:

  • Purchasers are required to withhold 12.5% from the purchase price where they do not have proof the vendor is an Australian resident
  • It is the purchaser’s responsibility to establish whether the vendor is an Australian resident
  • The proof required is called a ‘clearance certificate’ which the vendor requests from the Tax Office.
  • Where a clearance certificate is not provided by the vendor the purchaser must withhold 12.5% – this means the vendor only receives 87.5% of their sale proceeds!
  • Where a company or trust is involved the $750,000 threshold does not apply.
  • This applies to transfers of land between family members or entities – cash proceeds do not need to be part of the arrangement.

What you need to do

If you have entered into a contract to purchase or sell property (house, land, commercial property – anything) since 1 July 2017 contact us now!

We will help you work out whether a clearance certificate is required and if required help with the process of obtaining the certificate.

Remember this is extremely important for both vendor and purchaser! The purchaser has the obligation to withhold, but if the vendor doesn’t act they may miss out on 12.5% of the proceeds until the next tax return is lodged!

Failure to comply with the requirements of the law can result in huge cash penalties being imposed by the Tax Office. Don’t risk it – talk to your accountant first!