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New TAX rules for property buyers

Major changes have occurred to the governments tax collection position on the sale of properties in Australia in recent times. SECFI and Courtenay Burn of Burn Professional Conveyancing have been closely monitoring these amendments to ensure we keep you abreast of the changes. They are:

ATO Clearance Certificates

The first major change is that of Seller’s of residential property where the sale consideration is on or greater than $750,000.00 require a Clearance Certificate issued by the Australian Tax Office (ATO) before settlement of the property takes place. Real estate agent’s have been encouraged to highlight this requirement to their clients early (at the property listing stage), as the clients failure to obtain a Clearance Certificate will require the Buyer’s agent (settlement agent) to retain 12.5% of the sale price at settlement and remit funds to the ATO on the day of or shortly after settlement.

Clearance Certificates must be produced for all sales regardless of the origin, nationality or resident status of the Seller(s). The requirement extends to companies selling properties. The rule of thumb is that the named person or entity appearing on the Certificate of Title as a registered proprietor must comply. In the event a Clearance Certificate is not issued by the ATO the client (Seller) will be notified as to why by the ATO and any outstanding issues or sum owed to the ATO may be resolved by the Seller/s completing or seeking suitable assistance to complete the “Foreign resident capital gains withholding purchaser payment notification form”.

ATO Withholding tax for new properties

The other major change is to the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 which was passed on 29th March 2018. Under Schedule 5 of the Bill, Buyer’s of real estate may be required to withhold GST on the purchase price of new residential premises and new residential subdivisions and remit the GST directly to the ATO on settlement.

Generally, these new rules apply to contracts entered into on or after 1st July 2018.It does not affect the sales of existing residential properties or the sales of new or existing commercial properties.

These new regulations have been designed by the government to prevent phoenix companies not paying the GST on new house and land packages, new units or newly subdivided vacant residential land.

Seller’s should seek advice from their accountant before writing a Contract for the sale of property as they are required by the law to set out to the Buyer a written notification including:

  • the amount to be withheld,

  • the name and ABN of the developer,

  • the GST inclusive market value of any non-monetary consideration and any other matters that are specified in the regulations.

These changes are not as scary as they sound, but SECFI strongly suggests you choose a settlement agent that's on the ball and ensures correct procedure is followed to protect you and potentially save you thousands of dollars. Now more than ever a competent, experienced and diligent conveyancing professional is required to act on your behalf in the settlement of your property. There is nothing more valuable than having the knowledge and expertise of an independent Licensed Real Estate Settlement Agent who is skilled in providing conveyancing services and is also readily available for advice. Please feel free to contact Courtenay Burn of Burn Professional Conveyancing to discuss these changes and how they may effect you and your next proposed property transaction. Burn Professional Conveyancing offers a discount to all SECFI clients and is our preferred settlement agent.

Information provided by:

Courtenay Burn

Burn Professional Conveyancing

4 May 2018

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