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Foreign Resident Capital Gains Withholding Tax

Posted by Northadvisory on March 8, 2018

From 1 July 2017, those who purchase Australian real property or interests in such property valued at $750,000 or more from a non-resident vendor would be obliged to withhold a 12.5% non-final withholding tax from the purchase price and pay this to the ATO. (From 1 July 2016 to 30 June 2017, the rate was 10% and the threshold at which the CGT withholding obligation applied was $2m.)

A purchaser is not required to make a payment to the ATO if:

  • the property is valued at less than $750,000
  • the vendor obtains a clearance certificate from the Commissioner, or
  • the vendor makes a declaration that they are not a foreign resident for tax purposes.

Exceptions

  1. Australian Residents – Foreign resident capital gains withholding doesn’t apply when the vendor disposes of an Australian real property and provides the purchaser with a clearance certificate from the ATO.
  2. Foreign Residents – Vendors can use the Foreign resident capital gains withholding variation application form to apply for a reduction in the rate of foreign resident capital gains withholding on the sale of certain taxable Australian property (the asset). It provides the details of the vendor, the asset, and the reason for a variation. The variation may reduce the withholding rate to nil, particularly if the main residence exemption applies to you. A calculation of the expected capital gain, using the following details will be required by the ATO in the application:
    • Sale price (estimated price if actual not available)
    • Cost Base
    • Capital gains tax discount you are entitled to
    • Whether the main residence exemption applies, with evidence.
    • Applicable capital losses

If you have questions on any of the above issues raised, please do not hesitate to contact us.

Kim Edwards
Accountant
T: 02 9984 7774
E: kime@northadvisory.com.au