Due to the high degree of foreign buyers entering into the Australian real estate market, the Australian Government wants to ensure that tax is paid on all eligible real estate transactions to prevent potential tax evasion. As such, the government has introduced a new law whereby, for homes with a market value of $2million or more, purchasers must withhold 10% of the purchase price unless the vendor supplies a Clearance certificate on or before settlement.
Where a Clearance certificate is not provided, the purchaser must withhold 10% of the purchase price and pay that amount directly to the Australian Taxation Office (ATO). The new withholding regime will apply to contracts entered into on or after 1 July 2016.
For Australian residents considering selling their home, applications for a Clearance certificate can be made online before listing their property for sale. All certificates are valid for 12months, however buyers will be required to withhold 10% of the purchase price if the certificate has expired.
Further information, including links to applications can be found on the ATO website.