Further to our recent article regarding the shakeup to conveyancing transactions as a result of the 2017 budget, a new piece of legislation has come into effect on 1 July 2017 which directly affects all real estate agents and buyers/sellers, where the market value of a property is over $750,000.
Although the aim of the legislation is to ensure that foreign residents selling property valued above $750,000 don’t short-change the Government with respect to paying tax on the sale of the asset, the legislation will encompass all transactions over that threshold regardless of whether the seller is a foreign person or not. Thus, it is important for all real estate agents, sellers and buyers alike to be aware of this change in statutory requirements, moving forward.
For transactions over the threshold amount, the seller will need to apply to the ATO for a clearance certificate which will need to be provided to the buyer prior to/at settlement. Should the seller fail to complete this requirement, the buyer will need to withhold 12.5% of the purchase price at settlement and pay this sum directly to the ATO. If this occurs, the seller can then apply to the ATO after settlement for a tax credit in relation to the capital gains liability which arises from the transaction.
The clearance certificates will be issued to sellers who are not deemed to be a ‘foreign person’ for taxation purposes, and will be valid for a period of twelve months from the date of issue. The seller can rely on the clearance certificate for the sale of multiple properties within that twelve-month period, if required.
It is important to be aware that there are timeframes associated with applying for and obtaining the clearance certificate. This is crucially significant as time is to remain of the essence for all conveyancing contracts in Queensland. If a seller is considering selling a property, or the sale price is unknown (for example the property is going to auction) and it is possible that the sale price will reach the threshold, it would be prudent to go ahead and obtain a clearance certificate in any event, so that same is at hand for provision to the buyer during the conveyancing process.
Foreign resident sellers will need to be aware that 12.5% of the purchase price for the property will be withheld at settlement and paid to the ATO, and they should factor this cost into their transaction calculations.
Our Gold Coast property law team are on top of the legislative changes and can provide you with specific and tailored advice in relation to your conveyancing or property needs.
If you have any queries about the abovementioned changes, or if you need assistance with a property transaction or contract, please feel free to telephone our Gold Coast office today on 07 5563 8970 to discuss your conveyancing transaction with one of our friendly team.