Changes to threshold and rate for foreign resident capital gains withholding payments

On 1 July 2016 a system was implemented to assist the Australian Taxation Office with the collection of capital gains tax from foreign residents, as part of the settlement process when selling or buying real property or interests in real property in Australia.

In general terms, the procedure (which applies to both foreign and Australian residents) is that unless one of the exceptions applies, a purchaser is required to withhold an amount (currently 10%) of the purchase price from the seller and pay it to the ATO (withholding payment). As this system is aimed at the collection of capital gains tax from foreign residents, there are exceptions for sellers who are not foreign residents, subject to the parties following the correct process. For example, Australian residents selling property may obtain a clearance certificate from the ATO prior to settlement.