If you are a foreign investor planning to sell your Australian property, you will need to note the following:
Signing of documents
Documents for the property transfer will have to be witnessed by qualified witness overseas and we suggest settling via the PEXA Digital platform as this will makes things easier. Our office is registered with PEXA.
Foreign resident capital gains withholding
Please note that Foreign resident capital gains withholding applies to vendors disposing of certain taxable Australian property (ie. Property with a sale price that exceeds $750,000.00). A 12.5% non-final withholding is applied to these transactions at settlement.
If the property sale price exceeds $750,000.00
If you are a Foreign person and the sale price of the property exceeds $750,000.00, you will need to:
- Obtain a Foreign resident capital gains withholding clearance certificate from the Australian Taxation Office on or before the settlement date of the property sale;
- Provide the purchasers with the Foreign resident capital gains withholding clearance certificate on or before the settlement date of the property sale;
- Allow and direct the purchasers to, at settlement using the balance purchase price to be received from the sale, pay the Australian Taxation Office the withholding sum applicable in accordance to the outcome stated in the Foreign resident capital gains withholding clearance certificate (if there is a withholding sum applicable).
What happens if you do not provide this certificate to the purchaser?
If the purchaser fails to withhold the sum, aside from general interest charges applicable, there will also be penalties imposed by the Commissioner, which is equal to the amount that was required to be withheld and paid.
The purchaser must pay the required amount to the ATO on or before the day they become the owner of the property.
Failure to provide this certificate to the purchaser may give rise to the purchaser being entitled to claim input tax credits reflecting the GST paid, which means that the purchaser may be able to claim the 12.5% as their own.
Appointment of an accountant
As such, you may wish to engage an accountant to apply for the abovementioned certificate.
Furthermore, please note that a foreign resident seller must lodge a tax return at the end of the financial year, declaring their Australian assessable income and including any capital gain from the disposal of their asset.
By doing so, you will then be able to claim a credit for any withholding amount paid to the Australian taxation office by the purchaser in their tax return. You may wish to direct questions about this to the accountant as they will be able to explain this in detail.
As an application to the ATO may take up to 28 working days, we suggest that you apply for the certificate on or before the signing of the contract of sale if possible.
For more information, please contact our team at (07) 5571 1600.