ATO Clearance Certificates Now Required for Real Estate Sales

In a Nutshell

From 1 July 2016 Australian residents selling real estate with a market value of $2 million or more must apply for a clearance certificate from the ATO.

If a clearance certificate is not obtained then the Buyer must withhold 10% of the purchase price and pay this to the ATO.

Reason for the New Laws

It appears the reason for the new law stems from the difficulty the ATO has in collecting monies from foreigners that have fled the country and there are no other assets in Australia to meet the tax liability.

Foreign residents are required to lodge tax returns if they have derived Australian assessable income which would include applicable capital gains tax. It appears that foreign residents with CGT liabilities are choosing not to comply and are taking tax free money out of the country.

To combat this the ATO has introduced the clearance certificate regime which will be applicable to property with an arms length valuation of $2 million or more.

Australian Resident Seller

In the case of a purchase price that is $2 million or above and the seller is an Australian resident, the seller will need to obtain a clearance certificate from the ATO to avoid 10% of the purchase price being withheld at settlement.

Foreign Resident

In the case of a purchase price that is $2 million or above and the seller is a foreign resident then 10% of the purchase price must be withheld at settlement by the buyer and provided to the ATO.

We recommend that real estate buyers, sellers and agents make themselves familiar with the new laws because there are consequences for failure to comply.

Sarinas Legal are conducting seminars on the new tax laws. Please contact us for further information.

For more information contact: Evan Sarinas. esarinas@sarinaslegal.com.au.

The above is not intended as legal advice and all liability is disclaimed for reliance on it.