Selling a property with a market value over $750k?
Then the ATO’s new rules for foreign resident withholding tax will affect you. Find out what you need to do.
That’s right, the foreign resident withholding tax rules introduced last year that previously only applied to property transactions over $2 million, will apply to all sales over $750k as from 1 July 2017.
How do the new rules affect you as a seller?
While the rule is aimed at foreign investors, it will affect all Australians selling property for more than $750k. The person buying your property has a statutory obligation to withhold 12.5% of the purchase price at settlement, which they are then required to pay to the ATO.
These rules apply to all property transactions including vacant land, residential property, commercial property, strata title and community title schemes.
How can you avoid paying the withholding tax?
After settlement, you’ll need to apply for a tax credit for the amount withheld by the ATO for the capital gains liability arising from the sale. If you want to avoid having the 12.5% withheld (and you believe your property has a market value over $750k), you can apply for a clearance certificate from the ATO and provide this to the buyer on or prior to settlement. If you’re automatically assessed as an Australian resident, a clearance certificate will be issued within a few days; the process may take longer for more complex applications.
PropertyNow are in the process of setting up an alert system for all customers selling property over $750k to guide them through this process and direct them to the appropriate ATO resources.
Are you a foreign resident?
If you’re not an Australian citizen or resident, the buyer of your property will retain 12.5% of the purchase price, which they’re then required to pay to the ATO. For sellers with a valid ‘Variation Notice’, the buyer will remit the amount stated in your notice.
Still uncertain how the new rules will affect you?
If you’re keen to find out more about the new foreign resident withholding tax rules, please visit the ATO's Withholding Tax webpage.
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