Another new financial year is upon us and with it we will see a raft of new regulations and changes in fees and today I want to highlight one that might pass you by accidentally, due to its name.
I would expect most property owners reading this article who are Australian citizens, to mistakenly skim past this summary of the Foreign Resident Capital Gains Withholding Payments rules, assuming they won’t be affected.
They would be wrong.
If you buy OR sell property worth $2 million or more after July 1, 2016, you will be required to pay attention to these ATO rules, and act accordingly, or risk delayed settlements and penalties.
What are the Foreign Resident Capital Gains Withholding Payments rules?
In short, these new rules have been drawn up to ensure foreign residents who sell taxable Australian real estate pay their required contributions as part of the foreign resident capital gains tax scheme.
To achieve this end, these new rules demand that buyers of any property that falls within the guidelines from July 1st, withhold 10 per cent of the purchase price and pay that directly to the ATO, unless the seller holds a valid Clearance Certificate.
As you can see, the onus falls equally on purchasers and vendors to abide by these rules by either the Vendor providing the right paperwork to ‘clear’ full payment or by the Purchaser withholding 10 per cent of the purchase price and passing it to the ATO.
How your conveyancer can make life simpler for purchasers
The Eckermann Conveyancers team has already been well drilled in these new changes and can advise you on your liabilities and responsibilities from this point forward.
There are some sensible actions we would encourage our clients to ask us to take when buying real estate in the era of these new Foreign Resident Capital Gains Withholding Payments rules, namely:
- Check for a Clearance Certificate from the vendor, or the vendor’s conveyancer, on or before settlement
- In the absence of a certificate, ensure 10 per cent of the purchase price is withheld and funds transferred to the ATO
While it sounds straightforward in isolation, remember this is just one consideration amid the raft of regulations, checks and fees your conveyancer is managing on your behalf during the settlement process.
How your conveyancer can make life simpler for vendors
As the Eckermann Conveyancers team has been studying these changes over recent weeks, it has become clear there are some prudent steps you can take now, if you are planning to sell property that falls within the new Foreign Resident Capital Gains Withholding Payments rules.
We would encourage you, as the vendor, to apply for a Clearance Certificate from the ATO as soon as possible, even before listing a property for sale, knowing it will remain valid for 12 months and take one extra hurdle away from the sale and settlement process.
Our understanding is that straightforward cases should only take a few days to receive the Clearance Certificate while more complex cases may take some weeks.
If you are a real estate agent in South Australia, or someone preparing to sell property valued at more than $2 million, the Eckermann Conveyancers team is ready to steer you and your clients through these new complications.
