From 1 July 2017, new tax rules will apply on any property transaction where the market value of the property is $750,000 and above. Although the new laws are aimed at foreign residents, all property owners must be aware that these new rules impact Australian residents selling properties at or above this value.
The new rules place a legal obligation on the purchaser to withhold 12.5% of the purchase price of real property valued at $750,000 or more, and to remit that amount to the Australian Taxation Office (ATO) on settlement, unless the seller obtains a clearance certificate.
This means that Australian resident sellers 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.
The new laws will take effect from 1 July 2017 and will impact all property transactions valued $750,000 and over, irrespective of whether the seller 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 per cent of the purchase price at settlement from the seller and pay that amount to the ATO. Following settlement, the seller applies for a tax credit in relation to the amount withheld by the ATO for the capital gains liability arising from the transaction.