It is stupid tax policy made worse…
From 1 July 2016 there will be a 10% non-final withholding tax on payments made to foreign residents that dispose of certain property. The effect of this will be that where a foreign resident disposes of Australian property, the purchaser will be required to withhold and pay to the Australian Taxation Office 10% of the proceeds from the sale.
The reason they are implementing this is to stop non residents from just not paying any CGT on these sales. To do this we force the purchaser, not the non resident seller, to undertake the withholding.
There are a number of exclusions. But the most important is that the new withholding regime will not apply to real property transactions valued under $2 million.
Because we all said that “if a non resident is happy to not pay tax, they will also be happy to pretend they are residents to avoid this withholding” the Government has now come up with another solution… Clearance Certificates.
These certificates confirm that the withholding tax is not to be withheld from the transaction and the Government has decided that, for real property transactions valued above $2 million, the purchaser must withhold 10% of the purchase price unless the vendor shows the purchaser a clearance certificate from the ATO.
So now everyone, including residents, will have to get one of these certificates if they want to sell property greater than $2 million.
So let me get this right…
Because naughty non residents were not paying their CGT on the sale of properties… Resident sellers now have to get a clearance certificate (non- residents won’t get one because they cannot)… and resident buyers have to keep watch to see if they have to withhold 10% – and if they don’t they will still owe 10%.
To stop non residents doing naughty things, residents are given substantial extra administration.
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