The recent changes to the Foreign Resident Capital Gains Withholding regime will have a large impact on the sale and purchase of land in New South Wales. These changes came into effect on 1 July 2017.
Vendors in New South Wales must now be aware that in transactions for the sale and purchase of land where:
- the contract was entered into on or after 1 July 2017; and
- the purchase price is over $750,000 (down from the previous threshold of $2,000,000),
they are required to serve on the purchaser a clearance certificate from the Australian Taxation Office confirming that the vendor is an Australian resident for tax purposes.
Failure by the vendor to serve a clearance certificate on the purchaser prior to settlement will result in the purchaser having to pay an amount representing 12.5% of the purchase price (up from 10% previously) to the Australian Tax Office at settlement.
With Sydney property prices still rising, it appears that when acting for vendors in the a sale of real property, obtaining a clearance certificate may be the new normal.