Foreign resident capital gains withholding regime

The Australian government has introduced a new withholding measure to assist in the collection of foreign residents Capital Gains Tax (CGT).

The new measure applies to transactions entered into from 1 July 2016. The new measure requires a purchaser to withhold 10% of the first element of the costs base (usually the purchase price) and pay it to the ATO when acquiring certain Australian assets from a foreign resident.

The new measure applies to the acquisition of the following types of assets:

• taxable Australian real property;
• an indirect Australian real property interest (such as acquiring shares in land rich companies); or
• an option or right to acquire the above assets.