Tax payers selling properties valued at $2 million and above must obtain from the ATO a ‘Clearance Certificate’.
The new withholding tax rule was introduced from 1st July 2016 and has been designed with foreign investors in mind who purchase properties from Australian residents. The certificate is there to ensure Capital Gains tax obligations are being met by confirming that a 10 per cent withholding is not needed to be withheld from the sale.
Should the Australian resident seller not produce a ‘Clearance Certificate’ prior to settlement, the purchaser must then withhold the 10 per cent from the sale and pay the amount directly to the ATO.
The ATO are imposing severe fines for both the seller and buyer who fail to meet the new withholding rule.
Our next post will be on teaching children about money.