Recent Tax Changes You Need To Consider When Selling A Residential Property

We have seen a spike in interest in people looking to purchase property at auctions in the past month or so.

With the market trending upwards, it is important that people looking to sell their property to understand their obligations when selling.

Foreign Resident Capital Gains Withholding Tax

In 2016, the Australian Taxation Office imposed a requirement that Vendors that are Australian residents for tax purposes that sell their property for more than $2,000.000 must obtain a clearance certificate from the Australian Taxation Office to avoid 10% of settlement funds being withheld and remitted to the Australian Taxation Office.

In 2017, the $2,000,000 sale threshold was lowered to $750,000 meaning that more properties were covered by the regime.

If you are not an Australian Resident and are selling a property for more than $750,000, you can apply to the Australian Taxation Office for a variation certificate to vary the amount that is being withheld.

GST Withholding

As of 1 July 2018, all vendors of residential property must give a notification to the purchaser as to whether GST is required to be paid at settlement.

For most residential properties, GST is not required to be paid. However, if the notification is not provided, the purchaser must withhold 1/11th of the sale proceeds and remit this amount to the Australian Taxation Office.

Where you are required to pay GST on the sale (for example: properties that are classified as ‘new’ residential premises or potential residential land), the purchaser will be provided details to allow them to remit the required payment to the Australian Taxation Office.

The recent requirements have made it ever so important for Vendors to understand withholding obligations as failure to provide a foreign residents clearance certificate or GST non-withholding notification could mean that up to 21% of the sale proceeds could be withheld at settlement.

When acting in property transactions we ensure that all ATO requirements are complied with and keep our clients informed as to what their obligations are at settlement.

If you are unsure whether you will be required to withhold an amount for GST or Capital Gains, please contact feel free to contact our office or reach me directly.

Chris Henderson

Chris Henderson

At Phillips & Wilkins, Chris practices in the areas of Property Law, Conveyancing and Family Law. Chris has grown up in the Northern Suburbs and continues to be a part of the local community as being a member of the Old Paradians Amateur Football Club and the Mill Park Cricket Club. Learn more about Chris' legal experience.