on 30-08-2017 08:30 PM
One of life’s certainties has entrenched itself in the conveyancing world.
We are talking taxes ... not the other one.
Up until now, many of us have had limited experience with the Foreign Resident Capital Gains Withholding Tax as it has only applied to the sale of properties valued over $2 million.
However, as of 1st July 2017, vendors selling properties valued at just $750K or more are required to provide the purchaser with an ATO Clearance Certificate prior to settlement.
The clearance certificate notifies the purchaser that the vendor is indeed an Australian resident, meaning the purchaser is not then required to withhold foreign resident capital gains tax.
Failure to provide this certificate obligates the purchaser to withhold 12.5% of the contract price (or value of the property) and to forward these funds to the Australian Tax Office.
This recent amendment to the legislation has caused quite a stir in the conveyancing community as we are now required to spend time sourcing clearance certificates when we could be using this time more productively.
Questions have certainly been raised. Why are we are carrying out additional work for no financial benefit? Why should we serve as unpaid tax collectors?
At any rate, legislative changes will not always suit everybody - perhaps this could be life's third certainty. At least for the moment, with the rules as they are, we may just have to grin and bear it.
Foreign Resident Capital Gains Withholding Tax applies to the sale of land, lease of land (if a premium has been paid for grant of the lease) as well as shares in a company that owns 10% of land or more. Interestingly, it also applies to mining, quarrying and prospecting rights, even though these are not real property.
on 31-08-2017 10:03 AM
Thanks for sharing @NL, very handy information to raise to the surface so that others can be aware of changes.
on 13-07-2018 03:08 PM
Hi @Louise1 Once you have completed the relevant forms with the ATO, you can add it as a Destination Financial Line item. Make sure to include the 18 digit reference number provided by the ATO,
on 13-07-2018 03:23 PM
Just following on from Marian's post. The product team will also be implementing further changes to the Destination Line Item Category = Foreign Resident Capital Gains Withholding in the near future where we will be updating the help text wording to be more specific around what is required to be entered into the Payment reference number field.
on 18-09-2018 05:02 PM
Can you clarify which destination line item? Vendors or purchasers? Technically the purchaser is responsible for the payment, however, it is the vendors liability...
on 24-09-2018 08:53 AM
We have implemented as you've mentioned.
Due to the Purchaser being responsible for the payment, the Line Item Category = Foreign Residential Capital Gains Withholding is only visible to the Purchaser (IP).
Let me know if you'd like any further information.