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The effect of The Tax and Superannuation Laws Amendment (2015 Measures No.6) Act 2016 (Cth) for Foreign Residents

On 1 July 2016, amendments to the Taxation Administration Act 1953 will come into effect which will implement a foreign resident capital gain tax withholding regime to assist in the collection of foreign residents’ capital gains tax liabilities.

In the case of taxable Australian property disposed of by foreign residents, vendors are required to withhold 10% of the total consideration for the transaction and remit the amount to the ATO unless specific exceptions apply.

The obligation to withhold lies with the purchaser.

The new tax legislation specifies that where an asset was acquired from a foreign entity, the Commissioner of Taxation must be paid 10% of a Capital Gains Tax Assets cost base just after its acquisition, if the asset is taxable Australian real property or an indirect Australian real property company title interest. For example, this would include real property situated in Australia, a lease of land situated in Australia or an interest of 10% or more in an entity whose underlying value is primarily derived from Australian real property that is bought from a foreign entity.

Exceptions apply and the purchaser will not be required to withhold if any of the following apply:

  • The market value of the CGT asset is less than $2million;
  • The transaction is an “on market” transaction on the stock exchange; or
  • The transaction is already subject to another withholding obligation.

This will be relevant not only to tax accountants and conveyancing lawyers but family lawyers too.

By Nicholes Family Lawyers

 

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