I recently went on record saying that a new tax policy aimed at stopping foreign investors sending sale proceeds overseas before compliance action can be taken could catch unaware buyers.
The new legislation requires buyers of properties worth more than $2 million to withhold 10 per cent of the purchase price and send it to the Australian Tax Office (ATO), if the vendor is a foreign resident for tax purposes.
First National Real Estate is supportive of this legislation but it is essential that lawyers and conveyancers proactively ensure their clients abide by the new laws.
It is important to note that if buyers don’t retain the 10 per cent withholding tax, they could find themselves liable for a penalty, which could be the full 10 per cent of the purchase price as well as interest. Nobody would want that.
To avoid potential settlement delays and complications, Australian owners selling properties worth more than $2 million must now obtain a clearance certificate from the ATO to prove they’re an Australian resident for tax purposes.
While there is no charge for the certificate, which is anticipated to take several days to obtain via an online application, the ATO warns some applications could take up to four weeks.
Vendors would be well advised to apply for the certificate the moment they appoint a conveyancer and real estate agent. This will assure that the moment a sale price is agreed with a buyer, there will be no impediment to completing a contract of sale and the buyer will have confidence they are not placed at risk.