Capital gains withholding

by | 17 Apr 2019 | Accountants, Bookkeepers, Mortgage Brokers, Tax Agents

Selling a Property valued > $750,000 after 1 July 2017? – This can impact you even if you are Australian Resident:

On 9 May 2017, the Government announced proposed changes to the foreign resident capital gains withholding (FRCGW) rate and threshold. The changes will apply to contracts entered into on or after 1 July 2017.

This would imply that if you enter into a contract after 1 July 2017 to sell your real property (residential or commercial) valued > $750,000, the purchaser will be required to withhold 12.5 of the first element of the cost base and remit this to the ATO. To avoid this, vendor is required to obtain a clearance certificate from the ATO.

Background – What is FRCGW ?

Where a foreign resident disposes of certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price and pay that amount to the Australian Taxation Office (ATO).

Who does this impact?

This impacts all vendors as if you are a Australian Resident, you are required to obtain Foreign resident capital gains withholding clearance certificate from the ATO to avoid tax withholding of 12.5%. It also impacts the buyers as this can delay the settlement process as vendor would prefer not to have tax withheld if he is Australian Resident. As a buyer you would like to get the vendor to provide you with the clearance certificate well in time to ensure a smooth settlement.

How to Apply?

Vendors may complete and lodge the form themselves. They may also have it completed and lodged on their behalf by a third party, for example a solicitor or an accountant.

Conveyancers, real estate agents and others charging a fee for services (who are not a legal practitioner or registered tax agent) should get the vendor to provide a completed paper PDF version of the form to them who can enter the details in the online form (this ensures faster processing) as part of the settlement process they provide for the vendor.

If you’re a conveyancer who is not a legal practitioner or tax agent, you can be the contact for the purposes of the form. However, you will not be able to answer questions, by way of tax advice in relation to the application, ATO may ask. If questions are asked, ATO would expect that you relay these to the vendor, the vendor can then provide you answers and you can communicate the vendor’s answers to ATO.

How long does it take to obtain the clearance certificate?

This can take anywhere between few days to 28 days. To ensure a smooth settlement, it is advisable to apply as soon as the contract of sale goes unconditional.

FRCGW ATO Clearance Assistance

If you need our assistance in obtaining FRCGW Clearance from ATO, please fill the vendor details below and we will submit the application to ensure you receive the clearance in timely manner and have a smooth settlement. If you have any questions, feel free to contact us at 03 5940 7777 or 0432 667 846. Alternatively drop us an email at taxagents@atbl.com.au