The 1st of July, 2017 saw the implementation of a new 12.5% tax on property sales of $750,000 or more issued by the ATO if sellers cannot prove that they are an Australian resident. The new policy intends to ensure foreign property owners do not avoid capital gains or other tax liabilities.
While this law has been in play since last year, the 10% tax only applied to properties selling from $2 million, which meant that it went under the radar for average investors.
Is your client selling for over $750,00? What they need to do.
If you or your client is selling property worth over $750,000, all you have to do is provide a “clearance certificate” issued by the Australian Tax Office to the purchaser on settlement of the sale to avoid the 12.5% withholding tax. Foreign sellers will have the tax withheld and remitted to tax authorities.
The tax applies to sales of Australian property including vacant land, buildings, residential and commercial property, options and leases. While this change is not widely known, it aims to combat tax avoidance by foreign sellers and tax evasion by Australian resident sellers.
When selling your property for more than $750,000 be sure to check with your real estate agent and or accountant on how to get your clearance certificate.