The bizarre new tax rule for buying and selling Aussie property

Not that I have a $2M plus property, but...

The bizarre new tax rule for buying and selling Aussie property

In just a few weeks, the ATO will implement a strange new tax rule to all Australian residents buying or selling property which has a market value of $2 million or more.

The new rule, which will be put in place in order to prove the seller is an Australian resident, requires sellers of residential and commercial properties for more than $2 million to obtain and present a buyer with a clearance certificate by the settlement date in order to be paid the full sale price.

Without a certificate, the buyer will be required to withhold 10% of the property sale price and pay this directly to the ATO.

 

Not many of us face this issue as our properties nowhere near $2m.

 

Not sure what is so bizarre with this rule? It's been around for ages on interest and dividend payments to non-residents (of any size) and it only makes sense that they would do it to help cut down tax avoidance on those not paying the CGT that they should be on Australian property.

The question of course will be how much a nightmare they make getting the clearance on Australian residents, the ATO have said it will be easy, which translated to reality means it will be an administrative nightmare that takes weeks to get a single piece of paper from them...

 

Only a problem in Sydney for the most part. Plenty of areas with 》$1.5m median (usually for a knock down).

 

They should make the threshold lower - $1mil.

 

From the article:

“There is no ATO fee for clearance certificate applications and we encourage all Australian residents who are looking to sell property with a value of $2 million or more to apply for a clearance certificate as early as possible in the sale process.”​

Is "as early as possible in the sale process" code for "it's going to take time to get one? Looks like you are onto something.

So really, anyone considering selling a property in this price range would want to apply for the certificate very early in the process.

 

As someone who deals with the ATO on an almost daily basis, nothing they touch ever is easy and their systems are so archaic and poorly designed that everything takes as long as humanly possible and sometimes even longer!

Having said that, their initial claims were that it should be a 2-3 day turnaround on the majority of applications.

 

Apparently the certificates are going to be valid for 12 months, so in theory the vendor should organise this when they are either thinking of selling, or when they are listing.

Edit: Agree with @wogitalia, the time frames I heard were a couple of weeks but lodging via either fax or mail will make it even longer as it takes the ATO forever to process paper forms.

You'd think that if they were creating a new form they would make it able to be electronically lodged via the portal to speed up the process. That would be too sensible though.

 

I was at a conference not to long ago with an ATO presenter and the question was asked if they ever plan on fixing the ATO tax agent portal and doing electronic forms to which the basic response was "we have no funding for that so it wont be changing any time soon", was a pretty "popular" response with the crowd.

I love that the portal hasn't changed in the past decade basically now and that it's one of the worst and most useless sites on the entire internet, it somehow sums up the ATO in general though, imo.