Tax Clearance certificates for property sales over $2million from 1st of July 2016
If you are planning to buy or sell a property in excess of $2 million, a new clearance certificate would be required from the 1st of July 2016.
The Australian government has came up with the new rules that applies to every buyer or seller regardless of whether they are a Australian residents or not.
10% of non-final withholding tax has to be incurred for all the contracts with market value of $2 million or above that are entered by parties on or after 1 July 2016 if this certificate has not been availed by either party before the sale of the property in question.
The seller would be required to provide a clearance certificate to the buyer or else the buyer would need to withhold 10% of the sale price and pay this amount to the ATO.
The general rules are as below:
- The seller needs to provide a clearance certificate to the purchaser prior to settlement.
- For foreign residents variation certificate is to be obtained. Seller can apply to Australian government for such a variation and provide this notice to the purchaser prior to settlement.
- These rules would generally be intended to foreign residents’ tax compliance. The 10% withholding tax in such circumstances would be credited against their income tax return and be assessed at the non-resident’s rate at the end of the year.
Clearance certificate can be obtained for no fee from the ATO.
The certificate so obtained is valid for a period of 12 months from the date of issue.
For more information visit the links below from the ATO or contact our office.
https://www.ato.gov.au/Media-centre/Articles/Property-withholding-rules-explained/
https://www.ato.gov.au/Media-centre/Media-releases/New-tax-rules-for-property-sales-over-$2-million/