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CGT Withholding rules when purchasing or selling a property

Announcement posted by Chan & Naylor 02 Aug 2017

Those who want to buy or sell a property in Australia for $750,000 and above should know the Capital Gains Tax Withholding rules. From 1 July 2017, sellers are required to provide the buyer a “clearance certificate” from the ATO prior to settlement of all real estate transactions worth $750,000 or more.

If the seller does not provide the clearance certificate, the buyer will need to withhold 12.5% of the price to be passed on to the ATO. The seller, on the other hand, would have to wait until lodgement of their income tax return to recover the withheld amount.

The rules aim to address the problem of foreign residents selling properties without paying their capital gains tax liabilities. However, many real estate transactions will be affected, even those that do not involve foreign residents. The ATO recommends the sellers to apply for a clearance certificate at least 14 days before settlement.

If you want to sell a property at $750,000 or more, Chan and Naylor may assist you in applying for the clearance certificate from the Australian Tax Office. Meanwhile, if you are a buyer of a property worth $750,000 or more and the seller does not provide you with a clearance certificate, you will need to withhold 12.5% of the price. We can also assist you with the reporting requirements and the process of paying for the withheld amount to the ATO.

For more information about property investment and taxes in Australia, contact a Specialist to discuss your particular circumstances.

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Chan & Naylor Group has nationwide offices in Brisbane and Capalaba in Queensland, Melbourne and Moonee Ponds in Victoria, East Perth in Western Australia, and Bankstown, Parramatta, Pymble, North Sydney, and Sydney in New South Wales.

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