Editor: Since 1 July 2016, where a foreign resident has disposed of taxable Australian real property (i.e., real estate located in Australia) or certain indirect taxable Australian real property interest, the purchaser has had to withhold 10% of the purchase price upon settlement and remit this amount to the ATO, where the market value of the property is $2,000,000 or greater.
Unfortunately, withholding must occur unless the vendor has obtained what is referred to as a ‘clearance certificate’ from the ATO, even if, say, a sale of real estate with a market value of $2.5 million was to take place between two siblings, who have been Australian residents for 50 plus years, despite the two siblings clearly knowing the residency status of each other!
The Treasury Lawes Amendment (Foreign Resident Capital Gains Withholding Payments) Bill 2017 makes changes to this foreign resident withholding regime, to increase the withholding rate to 12.5% and to lower the market value of the property, below which there is no need to withhold, to $750,000, in relation to acquisitions of property that occur on or after 1 July 2017.
Editor: These changes only further reinforce the need to obtain clearance certificates where the vendor is an Australian resident, as $750,000 is not a high exemption threshold given the sky-rocketing values of Australian real estate!
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