Danger for buyers of Australian property of $2 million plus
In the Tax and Superannuation Laws Amendment (2015 Measures No 6) Act, the government introduces a new withholding obligation on the purchasers of certain Australian assets.
From 1 July 2016, a purchaser of certain CGT assets will need to withhold 10% of the purchase price and remit it to the Commissioner of Taxation if the seller does not provide a “clearance certificate” from the Commissioner. The Commissioner will only give such a certificate if the seller is an Australian tax resident.
This withholding is not a final withholding tax, so the seller will still need to include any capital gain in his or her tax return and claim a credit for the amount withheld.
The assets to which this withholding applies are where the asset is valued at $2 million or more, irrespective of what it is sold for, and the asset is taxable Australian real property, or an indirect interest in Australian real property.
Until the Australian Taxation Office implement a process to obtain clearances, this will be an administrative nightmare.
Where a withholding obligation exists, the purchaser must withhold the relevant amount at settlement and pay it to the Commissioner.
The penalty for failing to withhold is equal to the amount that was required to be withheld.
When an amount is withheld, the purchaser is required to complete this online form and provide details of the vendor, purchaser and the asset being acquired.
Conveyancing lawyers will need extra time to satisfy these requirements on your behalf.