Home sales above $750K require proof that the seller is not a foreign investor
The recent budget made changes to the Foreign Resident Capital Gains Withholding (FRCGW) regime in two significant areas.
Firstly, the rate of withholding increased from 10% to 12.5%, and secondly, the threshold for real property dropped from $2million to $750,000.
Why this is important is that the withholding regime requires the purchaser to withhold a portion of the sale price and pass it on to the Australian Taxation Office by settlement unless the vendor has a clearance certificate for real property or a vendor declaration in the case of shares, units, rights and options.
While this might seem clear enough, what it in fact means is that all vendors, including Australians, selling real property are considered to be foreign residents unless they have a clearance certificate showing otherwise.
And now that the threshold has dropped to $750,000 a lot more home sales are going to fall under the FRCGW regime.
What is the potential penalty for non-compliance?
The penalty is the 12.5% that should have been withheld and a penalty of $2,500 plus a further penalty equal to the amount of money they should have withheld.
Who can apply for a clearance certificate? the vendor, their lawyer or their accountant.
So, if you are considering selling your place of residence or an investment in property make sure you consult with your solicitor and accountant before you sign any contract.
Call me today on 07 3264 4783 if you wish to discuss further.