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AJML Accountants Update – Mar 2022

Foreign resident capital gains withholding – part 2

Buying a property

If you have bought a property worth AUD$750,000 or greater, you must withhold 12.5% of the purchase price, unless the vendor provides you with a clearance certificate from the ATO before settlement.

If you are buying a property worth AUD$750,000 or greater, but did not receive a clearance certificate and you do not withhold the ATO will make you liable for the withholding amount and interest.

To pay the withholding to the ATO, you must complete the online Foreign resident capital gains withholding purchaser payment notification online form and instructions by settlement.

Note: All purchasers involved in the sale must complete the form.

Paying the withholding

A purchaser must pay us the withholding equal to 12.5% of the first element of the CGT asset’s cost base (the cost base is generally equal to the purchase price). Where no money is paid or required to be paid, or the agreed amount is under market value, then the 12.5% withholding is on the market value of the CGT asset.

Note: The first element of cost base doesn’t include any disbursements at settlement (for example, for council rates, water and sewer charges and strata levies). Therefore, the withholding amount is 12.5% of the purchase price before adjustment for disbursements.

The purchaser is liable to withhold and pay this amount. If this does not occur when it should, the ATO will hold the purchaser liable.

When the payment is required

To pay the withholding to us, the purchaser must complete an online Foreign resident capital gains withholding Purchaser Payment Notification form.

Where there are multiple purchasers one form can be used if there are 10 or fewer purchasers, or purchasers can lodge a form individually.

Once a payment notification form is processed, a payment reference number (PRN) will be issued, along with a PDF icon that can be clicked on to obtain a downloadable payment slip and barcode to use at Australia Post.

Only one PRN is issued per purchaser payment notification form, even if multiple purchasers are supplied on the form.

The purchaser (or purchasers) must pay the withholding to us on or before the day they become the owner of the asset, and they require the PRN, payment slip and barcode to do this. Without these, the purchaser will not be able to make the payment at Australia Post.

The ATO encourage purchasers to submit the payment notification form to us as early as possible, to ensure they have the payment reference number at settlement.

If the purchaser fails to obtain a PRN and pay the withholding when they become the owner of the asset, general interest charges will be imposed.

There is a short grace period from, and including the day of settlement, for the withholding to be paid in full. General interest charges will accrue from the date of settlement if the ATO don’t receive the withholding within the grace period.

All parties should view the Purchaser payment notification form before settlement proceeds and should contact us if there are changes to the settlement date on the form.