Property investment has been one of the active investment activities in Australia. In the last few years, it has increased tremendously due to an increase in population and foreign investors. Australian Taxation Office (ATO) have begun to focus more on property buying and selling activities. New laws have been introduced and one of the major laws introduced recently is FRCGW. This law requires all property acquisitions over $2 million made between 1 July 2016 and 30 June 2017 required a purchaser – who is obliged to withhold – to pay 10% of the first element of the cost base of the CGT asset to the commissioner.
Where the contract is entered into after 1 July 2017, this legislation has been updated requiring all purchases over $750,000 of:
• taxable Australian real property; or
• indirect taxable Australian real property interest, the holding of which causes a company title interest to arise.
must withhold 12.5% of the acquisition price and submit it to the ATO, forming part thereof a pre-payment of Capital Gains Tax for the Vendor.
The Vendor must apply for an Australian Clearance Certificate from the ATO and supply it to the purchaser prior to settlement. The Certificate will identify the withholding percentage which is then used to offset against ultimate capital gains tax.
