New law to affect property transactions over $2 million
New laws have been passed which aim to ensure foreign residents are responsible for their capital gains tax liabilities however, the laws will apply to any person buying or selling property with a market value of $2 million or more.
Any person selling property at this value or more must, unless an exception applies, obtain a clearance certificate from the ATO which will be provided where the ATO is satisfied the seller is not a foreign resident.
The types of property covered includes the sale and purchase of any interest in Australian real estate (including leasehold), a mining or quarrying right or an interest of 10% or more in an Australian entity that predominantly holds land.
In the event the seller is unable to produce the clearance certificate at settlement, the buyer is required to pay the 10% of the sales price to the ATO which is then held by the ATO. Amounts then held by the ATO will be credited in the seller’s income tax liability assessment.
A clearance certificate is valid for 12 months from the date of issue and must be valid at the time of settlement. Significant penalties can apply where a buyer fails to pay the required amount to the ATO when a clearance certificate is not produced.
The new requirements will apply to any applicable contract signed on or after 1 July 2016.
Please contact McLaughlins Lawyers for further advice on how the new laws will impact you and any obligations you may have when selling or buying a property.
Author: Amy Zipf
Partner: Ian Kennedy