Australian vendors selling a property for more than $750,000 must prove they are not a foreign resident by obtaining a clearance certificate through the ATO - starting 1st of July.
Here’s why
Several years ago, the Federal Government introduced measures to curb overseas investment in Australian residential property. The goal was to deter these investors from making large profits on their local investments and then taking the windfall out of Australia.
Buyers of properties over $2 million were required to deduct 10% from the purchase price and pay that amount to the ATO as a foreign resident capital gains tax, unless they received a clearance certificate from the vendor. Vendors could obtain the certificate from the ATO if they could prove they were not a foreign resident.
The new rule's effect
From 1 July, the $2 million price tag drops to $750,000. This new rule will affect far more people that it did previously – more than 50% of all houses sold based on Melbourne’s current median house price – despite being clearly aimed at overseas investors. The ATO believes the new measure will help catch local hidden black market property sellers.
A clearance certificate application form is available online through the ATO website. Vendors may complete and lodge the form themselves. They may also have it completed and lodged on their behalf by a third party, for example a solicitor or an accountant. And whilst the majority of applications can be obtained within hours, the ATO says that buyers could face a penalty if they did not withhold funds when they should.
For more information regarding clearance certificates head to the ATO website.
