BUYERS and sellers of property valued at $2 million or more need to be aware of new tax rules coming into effect on July 1.
Buyers will be required to withhold 10 per cent of the purchase price to send to the Australian Taxation Office (ATO) unless the seller provides a valid clearance certificate.
These rules have been introduced to ensure foreign residents meet their capital gains tax liabilities, however they will also apply to Australian residents selling their principal place of residence or investment property.
To ensure funds are not withheld from the proceeds of their sales, Australian residents will need to obtain a clearance certificate from the ATO and give it to the buyer before settlement.
Assistant commissioner Malcolm Allen encouraged all Australian residents looking to sell property with a value of $2 million or more to apply for a clearance certificate as early as possible.
“It is easy to obtain a clearance certificate. The form is available to download through our website, and there is no fee for clearance certificate applications.”
Clearance certificates are valid for 12 months from issue, and must be valid at the time they are made available to the buyer.
While the changes may be considered positive, ensuring foreign investors pay capital gains tax in line with Australian residents, they may also be seen as another burden on the premium property market.
Acton Dalkeith and Cottesloe director Grant Heymans believed the new rules added to a raft of other issues such as negative gearing, superannuation changes, tax on foreign buyers, high stamp duty and higher interest rates for investors that continued to dampen the property market.
“I believe any changes that make it harder to transact in a market place gives consumers (investors) a reason to look elsewhere,” he said.
“When they leave the market place it’s really hard to get them back.” n