tax return

If you are selling your property over the amount of $750,000 and you haven’t lodged a tax return in 2 or more years….. Then you better start looking into it NOW!

The ATO is getting smarter.

This relates to contracts dated after 1st of July 2017 with a $750,000 Purchase Price and over.

Last year the ATO introduced in July 2016 a 10% non-final withholding tax which took effect on any contracts dated from 1st of July 2016 with a purchase price over $2 Million.

From the 1st of July 2017, this has now been amended to purchase prices $750,000 and over, and the amount to be deducted is 12.5%.

What the ATO are finding is that they are using this opportunity to not only verify the seller is a foreign resident, but in the case of Australian Citizens, they are chasing up local hidden black market property sellers, and people who haven’t lodged a tax return in 2 or more years. Recently an older person in Sydney sold a $2 Million plus home but had not lodged a tax return in decades, so the ATO used this against her and didn’t issue the clearance certificate until they obtained from her what was required, causing her to pay penalties for the settlement delay.

WHAT DOES THIS MEAN & WHO DOES IT RELATE TOO?

  • Relates toALL properties within Australia – land buildings, residential and commercial.
  • ALLSellers whether or not they are foreign, NEED to be cleared in the ATO system.
  • Relates to properties with a contract price of $750,000 and overwrittenAFTER 1st of July 2017
  • If the contract price is $750,000 and over the seller MUST organise a clearance certificate to be ready in time for a sale. The certificate is valid for 12 Months, no application fee is required. The seller should receive the certificate within days of lodging the application, however, if there are irregularities, and manual processing is required, it can take up to 28 days.
  • IF A CLEARANCE CERTIFICATE CANNOT BE SOUGHT, 12.5% OF THE PURCHASE PRICE IS TO BE WITHHELD.THIS WILL BE PAID BY THE BUYERS SETTLEMENT AGENT TO THE ATO AT SETTLEMENT.

That’s right….12.5% will be paid to the ATO at settlement! It is possible to vary this 12.5% if the seller feels this is unreasonable….the seller can go online to ask for a variation of this amount. It will take up to 28 days for a reply.

Your real-estate agent needs to add the certificate to the contract of sale. This will ensure the buyer’s settlement agent does not deduct the 12.5% withholding tax at settlement.

In the act, it brings a third party into getting a fine (real estate agent). If they fail to advise the buyer of their obligations and assists in letting this get passed the keeper. Fine is $45,000 for an individual (seller) and $225,000 for a company.

*Information provided by West Coast Conveyancing!

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