Thursday, June 30, 2016

Selling a property in the top end? New ATO requirements may affect you.

We have just clicked over to a new financial year, which is always a busy time for both individuals and businesses alike. With so much going on, including the federal election, some sellers may not be aware of an important change which has taken effect from 1 July 2016, regarding the sale of a property for $2 million or greater. The Australian Tax Office (ATO) has introduced a new withholding tax regime. This is in the event that a foreign resident (for tax purposes) sells a property for $2 million or more, the purchaser will be required to withhold 10% of the purchase price, and pay this amount to the ATO.

A change like this can create a number of questions, so let's see if we can make things 
a little clearer...

Will this affect me if I am an Australian Resident?

The answer is yes. There's an additional step you are now required to take. Every seller needs to obtain a Clearance Certificate from the ATO proving that they are not a foreign resident and confirming that the 10% withholding tax is not to be withheld from the sales proceeds. The presumption is that monies will need to be withheld unless the Clearance Certificate is provided.

Who needs a Clearance Certificate?

The new rules apply to every person, trustee or company selling property with a market value (or agreed purchase price) over $2 million. This means, if there are two people on the title, both parties will be required to obtain separate Clearance Certificates prior to settlement.

What if I am in the process of already selling a property?

This new provision applies only to those Contracts for Sale entered into on or after 1 July 2016.

How would you go about obtaining a Clearance Certificate?

The 'Foreign resident capital gains withholding clearance certificate' application form can be downloaded from the ATO website and lodged with the ATO via fax or post. The application is free of charge.

What is the role of real estate agents?

It is important to note, that real estate agents are not allowed to be involved with this process as this could be viewed as giving tax advice, which we are not in the position to do. However, we are certainly here to help make sure our clients are aware that this process is required, so they can get the ball rolling as early as possible in the lead up to settlement.

For further information be sure to jump onto the ATO's website at or give them a call direct on 13 28 65. They'll be able to answer your queries and help steer you in the right direction.

It's a new financial year and Team Toop are excited to continue to work with our clients as 
we head into the second half of 2016! 

Suzannah Toop

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