Is your home worth over $750,000? If so, then the information below relates to YOU
Relates to sales contracts dated after 1st July 2017 with a $750k purchase price and over.
The Australian Taxation Office (ATO) introduced in July 2016 a 10% non final withholding tax which takes effect on any contracts dated from 1st July 2016 with a purchase price over $2 million. From 1st July 2017, this has now been amended to purchase prices $750k and over and the amount to be deducted is 12.5%.
What the ATO are finding, is that they are using this opportunity to not only verify if the seller is a foreign resident, but in the case of Australian Citizens, they are chasing up local hidden black market property sellers, and people who haven’t lodged a tax return in 2 or more years. Recently an older person in Sydney sold a $2m plus home but had not lodged a tax return in decades, so the ATO used this against her and didn’t issue the clearance certificate until they obtained from her what was required, causing her to pay penalties for the settlement delay.
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What does this mean to you?
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- Relates to properties with a contract price of $750k and over written after 1st July 2017.
- Relates to real property in Australia being land buildings, residential and commercial property.
- All sellers whether or not they are foreign, need to be cleared in the ATO system (this stops the guessing games as to who is foreign).
- At listing time, if listing price is over $750,000, the Seller is to refer to the ATO website, to organise a clearance certificate to be ready in time for a sale. This certificate is valid for 12 months, no application fee is required. The Seller should receive the certificate within days of lodging the application however, if there are irregularities, and manual processing required, up to 28 days.
- If a clearance certificate cannot be sought, 12.5% of purchase price is to be withheld and paid by the Buyer’s Settlement Agent to the ATO at settlement. It is possible to vary this 12.5% if the Seller feels this is unreasonable, Seller can go online to ask for a variation to this amount and will take up to 28 days for a reply.
- Add the clearance certificate to the contract of sale to ensure the Buyer’s Settlement Agent does not deduct the 12.5% withholding tax at settlement.
So if you are selling a property over the amount of $750k, and haven’t done a tax return in 2 or more years, you better start looking into it as soon as possible.
Article sourced from West Coast Conveyancing WA