The 2017-18 Budget proposal to change the ‘foreign resident capital gains withholding payments’ passed Parliament on 15 June 2017. This change has wide reaching impact to vendors of real property who contract to sell it for more than $750,000 after 1 July 2017.
The changes mean that any seller of real property contracted after 1 July 2017 with a contract price of $750,000 or above will have 12.5% withheld from their sale proceeds and remitted to the Australian Taxation Office (ATO) by the purchaser, unless the seller holds a Clearance Certificate.
These changes apply to Australian resident individuals (including those selling their home and residential investment property) in addition to the foreign residents with which the law is targeting.
The threshold prior to the changes was for properties worth $2 Million and above and only a 10% withholding tax applied.
While the withholding tax will be credited back to the seller when they remit their tax return, the loss of cash flow from the property could have significant impacts.
As an Australian resident selling your property with a sales price above $750,000, you will need to apply for a clearance certificate from the ATO to stop the withholding from applying at settlement.
The application process can take some time. For further details about these measures, or to ensure that no withholding applies to the sale of your property, please contact your usual Hanrick Curran advisor or Jamie Towers on 07 3218 3900 to be on the front foot with your 2018 planning.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.