The 1 July Tax problem you didn’t know you had
New rules to prevent foreign residents avoiding tax when they sell Australian property will affect everyone buying or selling property with a market value of $750,000 or more from 1 July 2017.
This applies to anyone buying or selling the following;
From 1 July, a 12.5% withholding tax will apply when foreign residents sell certain types of Australian property. However, if you are selling Australian property, the new rules assume you are a non-resident unless you have a clearance certificate from the ATO. Without this clearance certificate, the purchaser can withhold 12.5% of the purchase price and pay this to the ATO.
I’m selling a property what do I need to do?
If you are selling real property affected by the new rules after 1 July and that property is likely to have a market value of $750,000 or more, you need to contact us so that we apply for a clearance certificate from the ATO. Without this certificate, the purchaser of your property must assume you are a foreign resident and will withhold 12.5% of the purchase price and pay it to the ATO.
I’m buying a property what do I need to do?
If you are buying real property affected by the new rules after 1 July and that property has a market value of $750,000 or more, you need to ensure that you receive the clearance certificate from the vendor before settlement occurs. While the tax rules allow you to withhold 12.5% of the purchase price if the clearance certificate is not provided, it might also be a clever idea to have this built into the sale contract to avoid any uncertainty.
If you are selling a real property on or after 1st July 2017 and the sale price is above $750,000, make sure you contact us so that we can apply for a clearance certificate. You will have up until settlement to provide this to the purchaser, so if you are selling by auction and are unsure of the sale price until auction day, that’s ok, if it sells over $750,000, contact us immediately after the auction to ensure you have a clearance certificate prior to settlement so they do not withhold 12.5% of the purchase price.
Please contact us at Accumulus Advisory on 03 9377 4400 for further information.