Overview of Creditor Variation Applications for FRCGW
Legal Basis and Rationale:
- Under section S.14-235(1) of Schedule 1 and as detailed in paragraph 49 of Law Companion Ruling 2016/5 (LCR 2016/5), the ATO must consider creditors' rights in its decision-making process regarding variations. This ensures that FRCGW provisions do not inadvertently prioritize tax withholdings over creditors’ rights to recover debts.
Application Eligibility and Context:
- Both secured and unsecured creditors can apply for a variation of the withholding rate if they believe that the standard withholding rate compromises their ability to recover a debt from the seller.
- This situation is common when a creditor has a mortgage or other security interest over an asset being sold and the sales proceeds are not sufficient to cover both the statutory withholding and the secured debt (Refer to paragraph 50 of LCR 2016/5).
Application Process:
- Creditors should use the ‘Variation application for foreign residents and other parties’ form available online through the ATO website. Applications should be submitted well ahead of the property settlement to allow the ATO sufficient time to assess and process the request.
- Normally, the ATO issues a variation notice within 28 days from the date it receives all necessary information.
Responsibilities of the Seller:
- It is crucial for the seller to provide the buyer with the ATO-issued variation notice before the settlement occurs. The seller must ensure that the notice is valid (i.e., the settlement date falls on or before the expiry date mentioned in the notice).
Special Cases for Automatic Variations:
- The ATO has granted several class variations which automatically set the withholding rate to nil. These are applicable in specific scenarios like the transfer of assets following an individual’s death, a divorce, or from an income tax-exempt entity.
Conclusion
For those needing further assistance or facing unique situations, direct consultation with the ATO or a professional advisory service is recommended. Tax Ideas Accountants & Advisers are available to provide guidance and can be contacted at +61 2 83181545. You can also book an appointment through their live calendar for more detailed support. This proactive approach ensures compliance while addressing any specific concerns related to the FRCGW.
If you need more information, you can reach Tax Ideas Accountants & Advisers
at +61 2 83181545 or book an appointment.