The Foreign Resident Capital Gains Withholding Payments regime changed as of 1 July 2017.
The regime will apply to more properties and add additional compliance requirements to the sale of property. The new threshold for disposals of property is $750,000 and the withholding rate has been increased to 12.5%.
Who does the regime apply to?
Broadly, the new provisions apply to any purchase of real property from 1 July 2017 with a market value greater than $750,000, or an indirect interest in real property of greater than 10% through a land-rich entity.
How long is the Clearance certificate valid for?
The clearance certificate is valid for 12 months. You can use the same certificate for multiple sales by the same entity within the 12 month period.
What is the process of obtaining clearance certificates?
Pitcher Partners can provide assistance with obtaining the clearance certificates on your behalf. It is recommended to allow up to 30 days for the application to be processed. We are able to assist with more urgent applications so that settlement can occur without any withholding.
What if a clearance certificate is not obtained for a direct sale of real property?
If the property’s market value is over $750,000, the purchaser must withhold 12.5% of the purchase price at settlement. This amount must be remitted to the ATO.
Will there be an impact on the contract of sale?
Depending on the circumstances, the contract of sale might include special conditions that deal with obtaining and providing clearance certificates. Regardless of this, the purchaser will remain liable to withhold 12.5% of the purchase price at settlement if a clearance certificate is not provided.
What are the next steps?
Please contact us if you are considering selling a property for more than $750,000 within the next 12 months, or if you require further information about the implications of the Foreign Resident CGT Withholding regime.