Foreign Resident Capital Gains Withholding Payments

Foreign resident capital gains withholding payments is a new regime that will apply to anyone who purchases or sells a property over $2 million from 1 July 2016.

If you're selling a property ...

If you sell a property for over $2 million after 1 July 2016, you will need to obtain an ATO clearance certificate prior to settlement advising that you are a tax resident of Australia. Where a clearance certificate is not obtained, the purchaser must withhold 10% which will act as a credit when lodging your tax return for the relevant year.

If you're buying a property...

If you purchase a property for over $2 million after 1 July 2016 you must ensure the vendor has a clearance certificate from the ATO. Otherwise, you (the purchaser) must withhold and pay 10% of the purchase price at settlement to the ATO and complete a “Purchaser Remittance Form”.

What if you don’t withhold? What is the penalty?

The penalty for "failure to withhold" is equal to the amount that was required to be withheld. In other words, on a $2 million purchase you would be liable to pay another $200,000 to the ATO. The total cash impact to you would be $2.2 million and you would need to recover the $200,000 from the vendor.

What should you do?

If you are unclear on your obligations, get in contact with your Altus Adviser before the transaction so you’re clear on what you need to do.

We can also help you organise the clearance certificate if you need help with that too.