A new requirement in real estate transactions has been implemented affecting local residents in Australia selling properties. Effective July 1st this year, the Australian Taxation Office (ATO) will now require all local residents in Australia who are selling a real estate property to submit a Clearance Certificate specifically known as a foreign resident capital gains withholding clearance certificate. This certificate will serve as proof that the seller is not a foreign resident and applies to properties sold at a price of more than $750,000. Previously, such certificate was required only for properties for sale with a value of more than $2 million.
This move is part of the amended capital gains tax for foreign residents included in the 2017 Federal budget. The goal is to allow the ATO to capture more property transactions and this is expected to affect more than 60 percent of both property buyers and sellers in the country.
The new laws apply to all taxable real properties being sold in Australia. These includes vacant land, buildings, residential and commercial properties, leases and mining rights.
As for foreign residents who are selling properties, they cannot provide a clearance certificate and as such, they will have 12.5 percent of the sale price deducted from the price which will then be paid to the ATO.
With this new change, sellers who cannot show a clearance certificate from the ATO will have 12.5 percent of the purchase price withheld by the buyer. This means that they will not receive the full payment for their property as the money withheld will be paid directly to the ATO. Previously, it was only 10 percent of the purchase price for properties sold at more than $2 million.
The downside of this new policy for property sellers in Melbourne is it will add pressures and costs particularly during the settlement process. It is also likely that the settlement part will take more time. For this reason, it would be a good idea to get the assistance of a lawyer or conveyancer. An experienced attorney can help you review the contract and spot areas of concern before the purchase takes place.
The application form for the clearance certificate can be downloaded from the ATO website and this can be submitted online or in paper form. Most applications can be obtained in a matter of hours.
This new change in the policy was not welcomed by the Real Estate Institute of Australia (REIA). REIA President Malcolm Gunning said the capital gains tax withholding amount of $750,000 was too low saying that it should be no less than $1.5 million. Gunning noted that the average purchase price among foreign buyers who bought properties in Victoria and New South Wales was $1.6 million.
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By Wendy Chamberlain
Copyright 2017 | All Rights Reserved
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Advocate gives her buyers an experienced voice they can trust when it comes to negotiating to purchase something as important as their new home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. As your Vendor Advocate, Wendy is your trusted impartial voice managing the sale of your home. Get in touch today via www.FollowWendy.com for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner or take the stress out of selling.
