Foreign resident capital gains withholding rate variation application
The ATO has updated its instructions to vendors seeking a reduction in the withholding rate that will apply to the sale of certain taxable Australian property.
“The variation may reduce the withholding rate to nil, depending on the circumstances of the transaction and the reasons provided.”
The relevant foreign resident capital gains withholding variation application form provides the details of the vendor, the asset and the reason for a variation.
The variation may reduce the withholding rate to nil.
Among other things, details of additional supporting information that are to be attached to an application are provided.
These will depend on the reasons for the variation and the circumstances of the transaction, eg related party transactions, market valuations, roll-over provisions, carry forward losses and main residence exemption, and cost base details.
The vendor will have to provide the purchaser with an ATO issued variation notice on or before the day of settlement of the asset to ensure the reduced rate of withholding applies.
Each vendor must lodge their own application. Vendors who are parties to the same property transaction are not able to lodge joint applications.
The online version of the form is the preferred method of lodgement and any successful variations will be issued faster.
Alternatively the paper form is available, if you are unable to lodge online or prefer to lodge via post.
For more information or guidance, please contact:
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
“Each vendor must lodge their own application and provide the purchaser with an ATO-issued variation notice on or before settlement to ensure the reduced rate applies.”
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
Foreign vendors can apply to reduce the withholding rate on taxable Australian property sales.
This helps align the withholding amount with the vendor’s actual expected capital gains tax liability.
The variation application may reduce the standard withholding rate to nil.
If circumstances such as exemptions or losses mean little or no tax is payable, the ATO may approve a zero withholding rate.
Each foreign vendor must lodge their own variation application.
Even if multiple vendors are involved in the same sale, each must apply separately to obtain a reduced rate.
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Frequently Asked Questions
What is a foreign resident capital gains withholding rate variation application?
It is a formal request lodged with the Australian Taxation Office to seek a reduced rate of capital gains withholding for foreign vendors disposing of certain taxable Australian property.
Who can apply for a variation to the foreign resident capital gains withholding rate?
A foreign resident vendor selling Australian property can lodge the application. Each vendor on a property must submit their own application — joint applications are not permitted.
Why would a foreign vendor apply for a variation?
A variation is sought when the standard withholding rate (which is generally 15% under current rules) is higher than the vendor’s actual expected tax liability on the sale. Situations such as available capital losses, exemptions or rollovers can justify a reduced rate.
What information is required in the application?
The application needs details about the vendor, the asset being sold and a clear reason for seeking a variation. Supporting documentation may include market valuations, cost bases, evidence of exemptions, and other relevant tax calculations.
When must the variation notice be provided to the purchaser?
A copy of the ATO-issued variation notice must be given to the property purchaser on or before the day of settlement so that the reduced withholding rate applies at settlement rather than the full amount.
What is a foreign resident capital gains withholding variation application?
It’s an application a vendor can lodge to request a reduction in the withholding rate that applies when selling certain taxable Australian property.
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