From 1 July 2016 a purchaser of real property that has a market value of $2million or more will need to withhold an amount of 10% from the payment made to the vendor if they purchase property from a foreign resident.
Importantly, the presumption is that a vendor is a foreign resident unless the vendor has given the purchaser a clearance certificate issued by the ATO.
The withheld amount will need to be paid to the Commissioner of Taxation. If the payment is not made then the purchaser will be liable to pay the ATO a penalty equal to the amount that should have been withheld.
This regime also applies to property held by a company where a shareholder who holds 10% or more of the shares is a foreign resident.
Executors of deceased estates need to also be aware of this regime when transferring property of a deceased estate as they will also need to obtain a clearance certificate.
In addition, if there is a transfer of property from an outgoing trustee of a family trust to the new trustee, then it is likely that the outgoing trustee will need to obtain a clearance certificate.
In straightforward cases the clearance certificates are expected to be provided within days of receipt of an application however in some cases, such as where there is a discrepancy between the name of the taxpayer and the name on title, applications will require manual processing and this can take up to 28 days. It is therefore important to apply for the clearance certificate promptly. It would be prudent to apply for a certificate even if you are just considering selling property as certificates are valid for 12 months and can be used for more than one property.
For more information please contact Clare at Oakhill Lawyers.