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How to comply with foreign tax laws

4 October 2016

New tax rules now apply from 1st July 2016 for property sales over $2 million to help recover capital gains from some foreign residents after completion of sales. But do you know how to comply, and know who’s exempt?

Vendors selling a property for over $2 million have to apply for a clearance certificate from the Australian Tax Office (ATO) to avoid the purchaser withholding 10% tax from the purchase price.

If a valid certificate is not provided by settlement, then the purchaser is required to withhold 10% of the purchase price and pay this to the ATO.

REINSW held a webinar with Diane Skapinker, partner in the real estate group of the major law firm K&L Gates, who discussed the new law in detail. View the webinar here.

What advice should agents offer clients?
  • If an agent believes a property may sell for around $2 million or more they should advise the seller to apply for a clearance certificate as soon as possible 
  • An agent should warn non-Australian resident sellers that 10% may be withheld from the purchase price and paid to ATO unless the ATO agrees to vary the amount
  • Options to buy land are not covered by the $2 million threshold or clearance certificates, but a vendor can provide a residency declaration.
What is a clearance certificate?
  • A clearance certificate can be applied for at any time, including before a property is even listed, and is valid for 12 months. To obtain one, a vendor must complete an online application form from
  • If the vendor is automatically assessed as an Australian resident, a clearance certificate will be issued electronically within days of the application being submitted. If there are data irregularities or exceptions, the clearance certificate will be provided within 14–28 days. Higher risk and unusual cases may take longer
  • If there is more than one seller, each has to provide a clearance certificate.
What assets does it apply to?
  • Australian land (including the lease of Australian land)
  • An indirect Australian real property interest (10% or more of the shares or units in a land rich company or trust)
  • A company title interest in which shares in a company give rights to occupy land owned by the company is an indirect Australian real property interest
  • An option or right to acquire Australian land (or an indirect Australian real property interest).
What are the exclusions?
  • There is no withholding obligation for transactions involving the sale of Australian land (residential, commercial and vacant land, leases, easements, covenants and mortgages) and company title interests if they have a market value of less than $2 million
  • The $2 million exclusion does not apply to sales of indirect Australian real property interests (other than company title interests) or options
  • It does not apply to options to acquire land and also does not affect auctions.
What happens if there is more than one buyer?
  • If there are three buyers who are buying different proportions of the property, each would have to pay for their respective interests
  • If one buyer withheld an amount which exceeded the $2m threshold, the other buyers are not excluded because the market value of interests of all buyers must be aggregated.

To find out about applications to vary withholding amount, multiple vendors and titles, remittance and options to buy land, view the webinar here. It also discusses changes in the new Contact for Sale and Purchase of Land.