Tax Clearance certificates for property sales over $2 million from the 1st of July 2016
If you are planning to buy or sell a property in excess of $2 million, you will be required to obtain a new clearance certificate starting from the 1st of July 2016.
The Australian government has introduced new rules for people who 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 the 1st of July 2016.
A 10% non-final withholding tax will be incurred for all contracts of properties with a market value of $2 million or above entered by parties on or after 1 July 2016 if the clearance certificate has not been obtained by either party before the sale of the property in question.
The seller will be required to provide a clearance certificate to the buyer, otherwise the buyer will need to withhold 10% of the sale price and pay this amount to the ATO.
The general rules are as follows:
- The seller needs to provide a clearance certificate to the buyer prior to settlement
- Foreign residents will need to obtain a variation certificate. The seller can apply to the Australian government for a variation certificate and provide this notice to the buyer prior to settlement
- These rules would generally be intended for 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.
A clearance certificate can be obtained from the ATO for no fee.
The clearance certificate 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 03-86091889.
https://www.ato.gov.au/Media-centre/Articles/Property-withholding-rules-explained/
https://www.ato.gov.au/Media-centre/Media-releases/New-tax-rules-for-property-sales-over-$2-million/