Powered by MOMENTUM MEDIA
subscribe to our newsletter

New tax could delay property sales

The introduction of legislative changes for property sales over $2 million will create a new compliance burden and could delay property settlements, a national accounting firm has warned.

As of 1 July 2016, new legislation will come into effect under the Tax and Superannuation Laws Amendment Bill 2015, which introduces a new 10 per cent withholding obligation on the purchasers of properties over $2 million where the vendor is a foreign resident for tax purposes.

Sellers are also now required to obtain a clearance certificate to prove they are an Australian resident for tax purposes.

William Buck director Manda Trautwein said the legislative changes will put Australian and foreign residents on a level playing field, but they will face challenges.

“The tax compliance burden for resident taxpayers will significantly increase and conveyancers will need to ensure their clients are abiding by the new laws to limit property settlement delays,” she said.

Advertisement
Advertisement

“From a buyer’s perspective, they now have an obligation to withhold 10 per cent of the property price to ensure the purchaser is compliant with the new regulations, otherwise they could be liable to pay a penalty which is up to the full 10 per cent of the purchase price, plus interest.”

Meanwhile, Ms Trautwein said sellers could have less funding available which might otherwise have been available to discharge the mortgage on the property and/or fund a new property purchase.

“They could end up with only 90 per cent of the proceeds on settlement unless they are able to obtain a clearance certificate from the tax office,” she said.

“If there are data irregularities, delays of between 14 to 28 days are expected to obtain a clearance certificate.”

Ms Trautwein said the legislative changes were introduced to reduce difficulties that can be associated with collecting tax on gains resulting from the sale of property assets from foreign resident taxpayers.

PROMOTED CONTENT


“Some of these taxpayers have a limited connection to the Australian tax system and may be in a position to transfer proceeds offshore prior to compliance action being taken,” she said.

“Voluntary compliance by foreign residents in this regard is said to be extremely low.”

The ATO is yet to release the clearance certificate application form for Australian residents, as well as the variation application form for foreign residents and other parties, and the purchaser payment notification form.

[Related: Foreign buyer restrictions could push prices up]

New tax could delay property sales
mortgagebusiness

Latest News

OPINION: Debt-to-income ratio limits: do they help, or hinder? With the average property in Australian capital cities now over $700,000, l...

The Treasurer has met with regulators to discuss the housing market and consider whether “carefully targeted and timely adjustments” ...

The platform has become the first private sector exchange accredited under the ​​Trusted Digital Identity Framework. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.