Consumer News

Witholding tax could cause delays

11 July 2017

By Tim McKibbin – REINSW CEO

In 2016 the government introduced the foreign resident capital gains withholding tax. The objective of this law is to ensure foreign residents pay tax on any profits earned from the sale of Australian property.

Sellers of property valued over $750,000 need to gain a clearance certificate from the Australian Tax Office (ATO). If they don’t have one or it is refused the buyer needs to withhold 12.5% and pay it to the ATO.

From July this year the threshold was reduced from $2 million. This means many more properties will be subject to this tax rule, causing more work for solicitors and conveyancers, and could cause delays in settlement.

As a result I would expect to see more buyers requesting to see the clearance certificate before signing a contract as they seek to avoid any settlement delays.