Foreign resident capital gains tax withholding regime

September 22, 2016
TaxationNo Comments

bigstock_home_purchase_2427613-300x200Buying a property from a foreign resident? Then you may have to withhold the money before you pay to the seller.

The new withholding applies to:

  • real property in Australia (including land, buildings, residential and commercial property)
  • the grant of a lease over real property in Australia, where a premium is paid for the grant of the lease
  • mining, quarrying or prospecting rights
  • interests in Australian entities whose majority assets consist of any of the above property or interests (ie an indirect Australian real property interest), and
  • options to acquire any of the above property or interests.

The 10% withholding does not apply where:

  • the vendor provides the purchaser with the appropriate clearance certificate or declaration
  • the property is valued at less than $2m
  • the transaction is conducted through a stock exchange or crossing system
  • the arrangement is already subject to an existing withholding obligation
  • the arrangement is a securities lending arrangement, or
  • the transaction involves vendors who are subject to formal insolvency or bankruptcy proceedings.

Tax planning opportunities

If you are a foreign resident for tax purpose, you with Australian assets may consider bringing forward any contemplated transactions before these measure are enforced from 1 July 2016. Provided that the contract of sale is entered into before 1 July 2016 the withholding measures will not apply, even if settlement occurs after 1 July 2016.

Implementation process

The ATO has announced that the following online forms will be made available at www.ato.gov.au/FRCGW before 30 June 2016:

  • Clearance certificate application for Australian residents
  • Variation application for foreign residents and other parties
  • Purchaser payment notification.

Where a taxpayer is unable to access the webpage they can call 132 866 within Australia or +61 2 6216 1111 if they are outside Australia to obtain details of the information they will need to provide.

If you require any advice from one of our expert tax advisers, please contact our office.

Source: ATO