Foreign Resident CGT Withholding

If you own Australian property and have non residents involved make sure you are aware of the Foreign Resident CGT Withholding Regime.

Xi Chen and Chi Chen are siblings. Xi is an Australian tax resident and Chi is a Chinese tax resident. Xi and Chi own a residential investment property on the Mornington Peninsula and are looking to sell the property for $800k.

It might be easy to think that since the value of Chi's interest is less than $750k then there is no need to consider foreign resident CGT withholding.

But remember even though the foreign ownership proportion of the property is less than $750k the market value of the whole property is what is important for Foreign Resident CGT Withholding.

Don't forget foreign ownership interests when selling Australian property.

 

Yes the regime applies to each legal owner. Each owner must seperately apply and their TFN is their main identifier.
Generally its a matter for the solicitor or conveyancer to obtain a resident withholding clearance certificate but Chi isnt eligible for that.

Can also apply to a indirect interest. Eg Xi is trustee for a unit trust that owns a property. Chi is a unitholder. Whle the legal owner is a resident the witghholding regime applies to the trust interest which is a indirect interest in real property. Witholding applies to Chis interest.

The rules also contain two traps. Unless a resident clearance certifcate is obtained ALL owners are treated as if they are a non-resident. In practice the buyers solictor would withhold if the obligations were ignored for example. The buyer is also liable for the withholding tax

Capital gains withholding - a guide for conveyancers