Ideas Tax Knowledge Blog

Topics on CGT and GST for property buyers (3)  

Written by Ideas Group | Feb 17, 2021 11:22:54 PM

 

Understanding Foreign Resident CGT Withholding Rules for Australian Property

Foreign resident capital gains tax (CGT) withholding rules aren't just for Taxable Australian Real Property (TARP). They also cover other assets like:

  1. Indirect Australian real property interest: This involves buying 10% or more shares in a company or units in a unit trust mainly owning TARP.
  2. Options or rights to buy TARP or an indirect Australian real property interest.

While this note focuses on TARP, you can find more about these rules in the ATO's 'Capital gains withholding: Impacts on foreign and Australian residents' factsheet.

When does a property buyer need to withhold money at settlement under CGT rules?

Buyers must withhold money from the purchase price of TARP if:

  1. They become the TARP owner by buying it from one or more entities.
  2. The property is valued at $750,000 or more (or $2 million for contracts between 1 July 2016 and 30 June 2017). If there are multiple buyers, the $750,000 threshold applies to the property's total value, not each buyer's share.
  3. They haven't received a clearance certificate from the seller. (See page 104 for more on clearance certificates.)
  4. The ATO hasn't reduced the withholding amount to zero. (See page 105 for more on this.)

For more details, refer to Schedule 1 sections: S.14-200(1) and (4), S.14-210(1)(e)(i) and (2), and S.14-215(1)(a)(i).

Different rules apply to assets bought under an earnout arrangement, but this note doesn't cover them.

Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar.

 
View full post