CGT Amendments Relating to Foreign Residents
On 14 May 2013 the Australian Government announced amendments through the Tax and Superannuation Law Amendment Bill that would introduce a 10% non-final withholding tax on payments to foreign residents in relation to the disposal of certain Australian property.
As of 1 July 2016, the proposed amendments became effective and operational. Primarily, this means that if you are a foreign resident of Australia (for taxation purposes) and you dispose of a capital asset after 1 July 2016, you are required to withhold 10% of the purchase price as tax payable to ATO.
Broadly, the withholding tax is limited to the following taxable Australia property:
- “Real property in Australia – land, buildings, residential and commercial property;
- Lease premiums paid for the grant of a lease over real property in Australia;
- Mining, quarrying or prospecting rights;
- Interests in Australian entities whose majority assets consist of the above such property or interests – this is called an indirect interest;
- Options or rights to acquire the above property or interest”.
The withholding tax will apply in certain circumstances which fit within the following four criteria:
- The asset must “qualify” – this involves it being an asset that is currently subject to Australian CGT on disposal by a non-resident owner (as listed above).
- You must be a foreign resident for the purposes of Australian taxation law.
- The transaction is not excluded and the following circumstances are deemed to be exclusions:
- Real property transactions with a market value of $2,000,000.00 or less;
- Transactions listed on an approved stock exchange; and
- The foreign resident vendor is under external administration or in bankruptcy.
- You do not have a “clearance certificate”. These will be issued to Australian residents upon application and will essentially be utilised for transactional certain in the context of the withholding obligation.
Irish Bentley Lawyers assist a range of clients in taxation advice and litigation. We have extensive experience in addressing and resolving taxation matters. It is important to ensure that you seek proper legal advice prior to entering into transactions to avoid adverse legal or tax implications in the future.
Please note that the above does not constitute legal advice and Irish Bentley Lawyers make no representations or warranties as to the accuracy of any of the information contained herein. If you have a taxation issue, then please do not hesitate to contact the team at Irish Bentley Lawyers – there is no substitute for proper legal advice based on your individual and unique circumstances.