Since 1 July 2016, where a foreign resident has disposed of real estate located in Australia, the purchaser has had to withhold 10% of the purchase price upon settlement and remit this amount to the ATO, where the market value of the property was $2,000,000 or greater.
As a result of another 2017/18 Budget Night announcement becoming law, in relation to acquisitions of real estate that occur on or after 1 July 2017, the withholding rate has increased to 12.5% and the market value of the real estate, below which there is no need to withhold, has been reduced to $750,000.
Editor: Unfortunately, even if a sale of real estate with a market value of $750,000 was to take place between two siblings on or after 1 July 2017 (both of whom have been Australian residents for 50 plus years), withholding must occur unlessthe vendor obtains a ‘clearance certificate’ from the ATO – despite the two siblings clearly knowing the residency status of each other!
These changes highlight the need to obtain clearance certificates where the vendor is an Australian resident and the real estate is worth $750,000 or more - not a high exemption threshold given the sky-rocketing values of Australian real estate! If you are buying or selling real estate worth $750,000 or more (including a residential property, i.e., home) please call our office to see if a clearance certificate is needed.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.