Under the measure discussed in the article, buyers of property valued at $2 million or more may be required to withhold an amount from the purchase price and pay it to the ATO, even if the seller is not a foreign resident. The seller can avoid the withholding requirement by providing the buyer with an appropriate ATO clearance certificate. Contracts for affected property sales therefore need to address these withholding obligations.
What withholding obligations apply when buying property from a foreign resident?
Our Commercial Team discusses this topic
Foreign Resident Capital Gains Withholding and Property Sales
Until the 2011 General Conditions are updated you will need a special condition in contracts for sale where the contract is made on or after 1 July 2016 unless the sale price is below $2 million.
The Law Society of NSW and the Real Estate Institute of New South Wales have already updated that state’s edition of the Contract for Sale and Purchase of Land with a new clause to deal with this measure.
Under the measure, where the market value of the property is $2 million or more, the buyer is obliged to comply with a foreign resident capital gains withholding payment obligation ( even if the seller is not a foreign resident) unless the seller provides a clearance certificate from the ATO.
We have developed a special condition for the purpose of dealing with the measure.