Westwood Conveyancing

Property - Are you aware of the new rules on withholding tax?

Foreign Resident Capital Gains Withholding Tax 

New rules will apply to vendors disposing of certain taxable Australian property under contracts entered into from 1 July 2016. A 10% non-final withholding will be applied to these transactions at settlement - the legislation applies to real property with a market value of $2 million or more.

Australian resident vendors selling real property will need to obtain a clearance certificate from us prior to settlement, to ensure they don't incur the 10% non-final withholding.

This new withholding legislation assists the collection of foreign residents’ Australian tax liabilities. It imposes an obligation on purchasers to withhold 10% of the purchase price and pay it to us, where a vendor enters into a contract on or after 1 July 2016 and disposes of certain asset types (or receives a lease premium for the grant of a lease over Australian real property).

The foreign resident vendor must lodge a tax return at the end of the financial year declaring their Australian assessable income, including any capital gain from the disposal of the asset. The vendor may claim a credit for any withholding amount paid to us in their tax return.

• Australian resident vendors can avoid the 10% withholding by providing one of the following to the purchaser prior to settlement  
  • for Australian real property, a clearance certificate obtained from the ATO
  • for other asset types, a vendor declaration they are not a foreign resident.
• Foreign resident vendors may apply for a variation of the withholding rate or make a declaration that a membership interest is not an indirect Australian real property interest and therefore not subject to withholding.
• Purchasers must pay the amount withheld at settlement to the Commissioner.

Find out more on:

• Asset types
• Foreign resident vendor
• Clearance certificates
• Vendor declarations
• Variations
• Calculating the withholding
• Paying the withholding
• Lodging an income tax return

Please  phone our office today if you have any questions

Source  :  https://www.ato.gov.au/general/capital-gains-tax/in-detail/calculating-a-capital-gain-or-loss/foreign-resident-capital-gains-withholding/

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