ATO requires clearance certificate for sales over $2 million
The Australian Taxation Office (ATO) has introduced a new rule which affects investors who plan to purchase or sell a property with a market value of $2 million or more.
Announced in 2013 and legislated this year, the change was introduced to ensure foreign residents meet their capital gains tax (CGT) obligations.
Effective from the 1st of July 2016, the new withholding rule requires Australian residents who are selling a property with a market value of $2 million or more to obtain a clearance certificate from the ATO. The certificate confirms a 10 per cent withholding amount does not need to be withheld from the transaction.
If a seller does not produce a clearance certificate, the purchaser will be required to withhold 10 per cent of the sale price and pay this to the ATO.
Vendors are encouraged to obtain the clearance certificate as early as possible as it must be provided to the purchaser prior to settlement. Sellers who fail to produce the certificate and purchasers who don't receive them are both at risk of being required to pay severe penalties to the ATO for any false or misleading declarations made.
Sellers can obtain a clearance certificate by downloading the relevant form from the ATO website. Once obtained, the certificate is valid for twelve months from the date of issue.
