Foreign Resident Withholding

The new foreign resident withholding rules for sale of property with a value of $750K or more and a rate of 12.5% was passed and was made law effective 01 July 2017.

I have noted a major concern for those who BUY any residential property. The liability for the unpaid withholding tax rests with the PURCHASER of the property not the vendor.

Now many will say - Who cares ? I'm a resident etc but its important to understand the rules

1. Withholding applies to ALL property sales of $750K that are residential.
2. ALL resident taxpayers who are selling must get a ATO clearance certificate or withholding is deemed to apply
3. ALL non-resident taxpayers who are selling must either provide a variation OR the 12.5% withholding applies. They cannot request a clearance certificate.

The system has some fatal flaws regarding taxpayers who must self-assess their tax residency. There is a prevailing benefit in adopting the view you are a tax resident and obtaining a false clearance certifficate incorrectly. The problem may affect a buyer.

Buyers of property should diligently ensure their conveyancer / solicitor confirms in writing that all parties have satisfied the Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017.

Your solicitor / conveyancer may need to seek written clarification and include indemnity clauses in the contract with the vendor and their advisers regarding compliance.

Interested to hear from solicitors and the approach being taken regarding this concern