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Conveyancing Update: Withholding Tax
New obligations are now in place that affect sellers and buyers of properties with a purchase price of $2 million or more.
For contracts that were entered into on or after 1 July 2016, buyers of properties with a purchase price of $2 million or more are required to withhold an amount equal to 10% of the purchase price and pay such sum to the ATO. However, buyers are not required to withhold such sum if the seller has obtained a clearance certificate from the ATO.
Where the seller is more than one person or company then a clearance certificate will be required for each seller. If each seller does not provide a clearance certificate then the buyer must still withhold an amount equal to 10% of the purchase price.
The federal government introduced this legislation with the intention of capturing CGT on capital gains made by foreign residents. However, the legislation has been drafted in such a way that there is a presumption that the seller is a foreign resident and thereby the withholding requirement will apply unless proven otherwise i.e. by the seller obtaining a clearance certificate.
The penalty for not withholding the requisite amount and paying it to the ATO is equal to the amount that was required to be paid to the ATO (i.e. an amount equal to 10% of the purchase price). The ATO can recover such penalty plus interest from the buyer.
This is merely a brief summary of the new legislation to flag the existence of the new legislation.
We recommend that sellers and buyers discuss the situation with their lawyers and accountants before a contract is entered into. We recommend also that special conditions are prepared for contracts of sale of properties which have a purchase price of $2 million or more.
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Purchasing, selling or transferring property? Get the best representation. Contact Quinn & Scattini Lawyers on 1800 999 529, email mail@rmold.newwebsite.live or submit an enquiry below.
We are available to meet with you at any of our local offices (Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba) or by telephone or video-conference.
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- Text BUYING to 0408 738 668
- Text SELLING to 0427 501 601
This update is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.
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