A new CGT withholding regime for foreign residents will be introduced from 1 July 2016.
Any contracts entered into on or after this date by an Australian foreign resident vendor of real property with a market value over $2 million will need to apply for a clearance certificate from the ATO and provide this certificate to the purchaser before settlement. Otherwise 10% of the purchase price will be withheld by the purchaser and provided to the ATO on settlement.
The vendor can apply for a clearance certificate at the time they are considering selling the property but the clearance certificate will only be valid for 12 months and it must be valid at the time the transaction is entered into, to avoid the 10% withholding obligation.
The certificate can be completed online by the vendor/agent. The ATO will issue the clearance certificate anytime up to 28 days from the application date depending on the complexity of the data required by the ATO.
Variations can be applied for, requesting a lesser withholding percent.
The certificate and any variation should be provided to the purchaser before settlement so the purchaser can remit it to the ATO at settlement by either an electronic funds transfer, payment at the Post Office or mail a cheque to the ATO.
The relevant forms are:
1. Clearance certificate application for Australian residents
2. Variation application for foreign residents and other parties
3. Purchaser Payment Notification
Assets affected by the new CGT regime are:
– land, buildings, residential and commercial
– mining, quarrying or prospecting rights
– interests in Australian entitles whose majority assets consist of the above
options/rights to acquire the above property or interest