Capital gains withholding: Impacts on foreign and Australian residents

 Tuesday, August 01, 2017

Capital gains withholding: Impacts on foreign and Australian residents

Foreign Resident Capital Gains Withholding (“FRCGW”) first applied to vendors disposing of certain taxable Australian property under contracts entered into from 1 July 2016.

From 1 July 2017 new rules for FRCGW apply to contracts entered into after that date. The changes will apply to real property disposals where the contract price $750,000 and above (previously $2 million) and the FRCGW withholding rate will be 12.5% (previously 10%). The existing threshold and rate will apply for any contracts that are entered into from 1 July 2016 and before 1 July 2017, even if they are not due to settle until after 1 July 2017.

What this means for you:

Australian resident vendors can avoid the 12.5% withholding by providing a clearance certificate obtained from the ATO to the purchaser prior to settlement. Your lawyer will arrange this for you.

Foreign resident vendors may apply for a variation of the withholding rate or make a declaration that a membership interest is not an indirect interest and therefore not subject to withholding.

Purchasers must pay the amount withheld at settlement to the Commissioner of Taxation.

For further information on FRCGW and whether it affects you please do not hesitate to contact Zoe Broadbent at Cosgriff Lawyers.