Selling property over $2 million - new rules apply from 1 July 2016

As part of the governments focus on strengthening our foreign resident capital gains tax (CGT) regime, new rules will soon apply to sales of Australian real property with a market value of $2 million or more.

Sellers will incur a 10% non-final withholding tax for all contracts entered into on or after 1 July 2016 unless they obtain a clearance certificate or variation certificate.

Selling property with a market value of $2 million or above

Selling property with a market value of $2 million or above

Australian residents need to obtain a clearance certificate from the ATO prior to settlement to avoid the 10% non-final withholding tax and provide it to the purchaser prior to settlement.

Foreign residents may apply to the ATO for a variation to the 10% non-final withholding tax, and provide this variation notice to the purchaser prior to settlement.

Vendors can claim a credit for the withholding amount paid to the ATO against the final tax assessed in their income tax return.

Purchasing property with a market value of $2 million or above

You will be required to withhold 10% of the purchase price and pay it to the ATO unless the seller provides you with a clearance certificate

You may vary down the 10% non-final withholding tax if the seller has received a variation notice from the ATO and provided it you prior to settlement.

Purchasers must pay the amount withheld at settlement to the ATO.

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

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