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 come up with new rules if you buy or sell a property worth $2 million or above. This rule applies to every buyer or seller regardless of whether they are Australian residents or not with effect from 1 July 2016.
10% non-final withholding tax has to be incurred for all the contracts of market value of $2 million or above entered by parties on or after 1 July 2016 if this certificate has not been availed by either parties 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.