Recent legislative amendments are designed to ensure foreign
residents are liable to pay tax on capital gains on certain real
The amendments impose a 10% tax withholding requirement on
Australian real property valued at over $2 million
that is purchased from non-resident vendors for contracts entered
into from 1 July 2016.
The legislative amendments are drafted on the basis that the
vendor is a non resident which means that resident vendors may be
required to obtain a clearance certificate from the tax
commissioner to escape the 10% withholding by the purchaser.
The Act introduces a new regime imposing withholding obligations
on the purchasers of certain Australian real property transactions
and is designed to assist in the collection of the capital gains
tax ("CGT") liabilities of foreign
A purchaser that acquires certain Australian assets from a
vendor that is a foreign resident must pay 10% of the purchase
price to the Commissioner. The purchaser may withhold this amount
from the vendor.
The withholding amount is 10% of the purchase price, excluding
any adjustments to the purchase, but includes and GST and non
The obligation will apply to the acquisition of an asset that
a direct or indirect interest in taxable Australian real
an indirect Australian real property interest; or
an option or right to acquire such property or such an
The following acquisitions will be exempted from the withholding
transactions involving TARP and certain indirect Australian
real property interests valued less than $2
a transaction conducted through an approved stock exchange or a
broker operated crossing system;
an arrangement already subject to an existing withholding
a securities lending arrangement; or
transactions involving vendors who are subject to formal
insolvency or bankruptcy proceedings.
The withholding obligation will not be imposed where the vendor
obtains a clearance certificate from the Commissioner or where the
vendor has made a declaration about their residency status or the
nature of the interest in their asset.
The amendments apply in relation to acquisitions made on or
after 1 July 2016.
Contracts which will be signed after 1 July
2016 may prudently now need special conditions reflecting
the new regime warranties or declarations as to:
residency from the seller; and
a condition precedent to allow the seller to obtain a clearance
certificate from the Commissioner.
ClarkeKann are available to assist with any query you have
regarding the amendments.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Government plans a white paper on tax reform within two years and will then seek a mandate at the next election.
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