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Foreign Resident Capital Gains Withholding Tax Changes from 1 July 2017

The Commonwealth Government recently announced changes to the foreign resident capital gains withholding (FRCGW) rate and threshold. The changes will apply to contracts entered into on or after 1 July 2017:

  • for real estate property disposals where the contract price is $750,000 and above (currently $2 million); and
  • the FRCGW withholding tax rate will be 12.5% (currently 10%).

The existing threshold and rate will apply for any contracts that are entered into before 1 July 2017, even if they are not due to settle until after 1 July 2017.

By way of background, on 1 July 2016 the Commonwealth Government introduced a requirement that, if you are a purchaser of property for more than $2 million, you must withhold 10% of the Purchase Price and remit it to the Australian Tax Office, unless the vendor provides you with a clearance certificate or a variation certificate.

As a result of the recent amendment, from 1 July 2017 the regime reduces the contract price to $750,000 and the withhilding tax rate is 12.5%.

An exemption is available where the vendor is in financial distress as defined (eg. administration) but specific advice should be obtained in such cases.

For more information visit:

https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Foreign-resident-capital-gains-withholding-payments/

If you are buying or selling residential, commercial or rural property, Cormiston Legal can help. Please contact us on 03 6332 9353 or use our Contact Us form to get in touch with us - http://www.cormistonlegal.com.au/contact

 

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