From 1 July 2017, the withholding tax rules that were introduced last July for properties $2 million and above, will now apply to all property transactions where the market value of the property is $750,000 and above.
Although the new laws are aimed at foreign residents, real estate agents must be aware that these new laws impact all property sales at $750,000 and above. The new laws require a purchaser to withhold 12.5% of the purchase price of real property valued at $750,000 and above and to pay that amount to the Australian Taxation Office (ATO) on settlement unless the seller obtains a clearance certificate. Actually, the new laws will start on 1 July 2017 and are aimed at vendors that are ‘foreign persons’. However, these laws will impact all property transactions valued $750,000 and over, irrespective of whether the vendor is a foreign person or not. For any sale contract entered into on or after 1 July 2017 where the purchase price is $750,000 or greater, the purchaser has a statutory obligation to withhold 12.5% of the purchase price at settlement from the vendor and pay that amount to the ATO unless the vendor can provide a clearance certificate. Following settlement, the vendor applies for a tax credit in relation to the amount withheld by the ATO for the capital gains liability arising from the transaction. This means that Australian resident vendors who are selling property with a market value of $750,000 or above will need to apply for a clearance certificate from the ATO to ensure that their sale proceeds are not withheld. Source: REIQ
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