On 1 July 2016, the Federal Government introduced a withholding tax. The aim of the tax was to capture unpaid tax from foreign residents who sell taxable Australian real property. Where Australian real property was sold with a value at $2 million or over, the purchaser was required to remit to the Australian Taxation Office, 10% from the purchase price at settlement, unless the owner of the property provided a valid withholding tax clearance certificate.
Amendments to the withholding tax regime commenced on the 1 July 2017. The first change increases the withholding tax rate for foreign tax residents from 10% to 12.5%. Whereas the withholding tax threshold in the 2016-2017 financial year was $2 million, the threshold has been lowered to $750,000. These amendments apply in relation to acquisitions of property that occur on or after 1 July 2017.
The increase in the withholding tax rate and reduction of the threshold means foreign investors will be less able to avoid paying their capital gains tax liability on disposal of Australian real property. However, there will be a subsequent increase in the number of requests for withholding tax clearance certificates with the reduction of the withholding threshold.
For further information on the withholding tax, please contact us on 5303 0281 or at info@centralhighlandsconveyancing.com.au.
The information on this website is of a general nature only. It is not, nor is it intended to be legal advice. You should consult a lawyer for individual advice about your particular circumstances.
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