Thinking of selling your property? Tony Mulveney and Matthew Malloy tell you what you need to know about the new withholding tax (WHT) rules.
From 1 July 2016 new laws will take effect, impacting the sale and purchase of taxable Australian property (TAP). The original focus of these provisions was aimed at non-resident vendors, but has now been expanded.
Many vendors may inadvertently disregard these new laws where they are an Australian resident. Alas, the new rules are not that straight forward – as is often the case. Regardless of whether the vendor is an Australian resident, a Clearance Certificate must be obtained from the Commissioner to certify that the vendor is not nor will be a foreign resident. Without it, they will be subject to 10 percent withholding tax on the purchase price. Penalties for failing to withhold will be enforced, so it’s in the best interests of both the vendor and the purchaser to get this right.
The key then for Australian resident vendors selling TAP, is not to be caught out. A Clearance Certificate must be obtained, and the onus is on the vendor to organise it.
An online form to apply for a Clearance Certificate will be made available to Australian resident vendors on the ATO website prior to 30 June 2016. In straightforward cases the certificate should be provided within days of application, however in more complex scenarios, it could take up to 28 days. It is therefore paramount the vendor is organised prior to selling, bearing in mind a Clearance Certificate will remain valid up to 12 months after the date of issue.
This is a significant addition to the compliance requirements involved in the sale and purchase of Australian property, and vendors should not tread lightly when it comes to adhering to the new procedures.
Be sure to obtain a Clearance Certificate – don’t get caught out.