CURRENT AS AT 24 January 2019
With recent changes in law there are additional responsibilities when you sell a property. As part of the conveyancing process you will now be asked to provide a capital gains withholding Clearance Certificate which declares that you are an Australian tax resident. The Clearance Certificate notifies the purchasers that they do not need to withhold up to a maximum of 12.50% of the agreed price ( a figure that the ATO has decided on by law) from the sale of the property and forward this amount to the tax office.
The new measures were brought in to ensure that tax is collected at source on property sales from non residents, rather than chasing the full tax on lodgement of the non resident’s tax returns (which sometimes doesn’t happen). If you are an Australian tax resident you are relieved from this responsibility and you can just pay any tax owing when the tax return is lodged. The tax deducted at source from a non resident sale of property is allowed as a credit against the final tax liability calculated when the actual tax return for the year is prepared and lodged. There can either be more tax to pay or a refund when the actual tax amount is calculated.
What if you are a non-resident at the time the contract for sale is signed?
Then you are unable to provide the Clearance Certificate and a base rate of 12.5% of the agreed price will be withheld and paid to the ATO upon settlement. This rate can be varied for a few reasons with an application to the ATO.
The reasons for variation could include
- that the actual capital gains tax liability works out to be less than 12.5% of the sale price,
- the gain will be exempt,
- you are applying a rollover or
- the mortgage on the property will not be fully discharged should the 12.5% withholding be applied.
If you think you have reason to vary the rate of withholding, nothing can be done after the property has settled, so it is imperative you get in touch with your Client Manager shortly after the sale contract has been signed to see if you are entitled to apply for a variation. Variation applications can take up to 28 days to be processed and if you are successful, the Variation Certificate will need to be given to your conveyancer ahead of settlement.
On a similar basis the Clearance Certificate should be applied for early so they are available well before settlement
Each vendor requires their own Clearance Certificate or if applicable, a Variation Certificate. Both applications can be made via the ATO website using their online forms.
If you have any queries please contact us to discuss.
THIS NEWSLETTER HAS BEEN PRODUCED BY STANLEY & WILLIAMSON AS A SERVICE TO ITS CLIENTS AND ASSOCIATES. THE INFORMATION CONTAINED IN THE NEWSLETTER IS OF GENERAL COMMENT ONLY AND IS NOT INTENDED TO BE ADVICE ON ANY PARTICULAR MATTER. BEFORE ACTING ON ANY AREAS CONTAINED IN THIS NEWSLETTER, IT IS IMPERATIVE YOU SEEK SPECIFIC ADVICE RELATING TO YOUR PARTICULAR CIRCUMSTANCES.
LIABILITY LIMITED BY A SCHEME APPROVED UNDER PROFESSIONAL STANDARDS LEGISLATION.