BUDGET TAX SHOCK FOR HOME SELLERS
HOMEOWNERS offering properties for sale above $750,000 will have to obtain a clearance certificate from the Australian Taxation Office from July 1 to prove they are not foreign residents.
New changes to the capital gains tax for foreign residents, which were announced in last month’s Federal Budget, will also see the withholding rate increased to 12.5 per cent.
At present, only properties above $2 million are liable for the foreign resident capital gains withholding tax, which is 10 per cent.
Bourkes principal Alan Bourke said with the property threshold lowered from $2 million to $750,000, more homeowners than ever would be burdened with the administrative process.
“We are about to see one of the greatest changes to real estate transactions for many, many years,” Mr Bourke said.
“In the latest budget, Treasurer Scott Morrison announced that foreign residents with properties sold above $750,000 would be required to obtain a clearance certificate before they sold their home.
“In the fine print, all Australian residents are the ones who are required to get a certificate before they sell their home if it’s worth more than $750,000.
“The problem is that in the budget, the terminology used is ‘nonresidents’ Alan Bourke. and no one thinks it relates to Australian residents; it is poorly named.”
The existing withholding legislation is in place to assist the ATO with the collection of foreign residents’ Australian tax liabilities.
It imposes an obligation on purchasers to withhold a percentage of the purchase price and pay the sum to the ATO.
Australian resident sellers who want to avoid losing the proceeds of their property sale to the ATO are required to obtain the clearance certificate.
Without a clearance certificate and at the minimum sale price of $750,000, a seller would see $93,750 withheld by the ATO.
Clearance certificate applications are available online on the ATO website.