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CGT withholding regime

CGT withholding regime

CGT withholding regime

An introduction of a 10 per cent non- final  withholding tax on payments made to foreign residents that dispose of specific taxable Australian property will come into effect from 1 July 2016.

The new legislation will impact on any property transaction where the purchase price is more than $2 million. The withholding regime will apply to:

  • Australian real property – land, buildings, residential and commercial property
  • Lease premiums paid for the grant of a lease over real property in Australia
  • Mining, quarrying or prospecting rights
  • Indirect Australian real property interest
  • Options or rights to acquire such property or interest

The legislation is aimed at vendors that are ‘foreign persons’ to ensure their capital gains tax liability is retained. Any sale contract entered on or after 1 July 2016 will require the purchaser to withhold 10 per cent of the purchase price and pay that amount to the ATO. The vendor then applies for a tax credit for the amount withheld by the ATO following settlement.

The purchaser must withhold 10 per cent of the purchase price unless the vendor shows the purchaser a clearance certificate from the ATO. The ATO will only issue a clearance certificate to Australian resident vendors.

Where the vendor is a ‘foreign person’, the purchaser must withhold 10 per cent of the purchase price and pay that to the ATO unless the vendor provides a ‘Variation Notice’ in which case the purchaser must withhold the revised amount. A ‘foreign person’ vendor can obtain a Variation Notice from the ATO.


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Level 16, Westfield Tower 2, 101 Grafton Street,
Bondi Junction NSW 2022

02 9387 4300

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