New rules for selling property over $2M
The government is strengthening its foreign resident capital gains tax (CGT) regime to assist in the collection of foreign residents' CGT liabilities. New rules apply from 1 July 2016 to sales of taxable Australian property with a market value of $2 million or above.
A 10% non-final withholding tax will be incurred for all contracts entered into on or after 1 July 2016. The purchaser will be required to withhold 10% of the purchase price and pay that amount to the ATO.
Australian resident vendors selling such property, will need to obtain a clearance certificate from the ATO prior to settlement to avoid the 10% non-final withholding tax. Where a clearance certificate is provided, the purchaser is not required to withhold and amount from the purchase price.
It is important to recognise that this new regime covers more than just Australian land, it can apply to interest in companies and trusts which are “Australian land rich” and options covering such interests and Australian land.