On 9 May 2017 the Federal Government announced proposed changes to the foreign resident capital gains withholding payments (FRCGW) threshold and withholding rate.

These changes will apply to contracts entered into on or after 1 July 2017:

• for real property disposals where the contract price is $750,000 and above (previously $2 million)
• the FRCGW withholding tax rate will be 12.5% (previously 10%).

The previous threshold and rate will continue to apply to any contracts entered into before 1 July 2017, even if they settle after 1 July 2017.

Thus where a contract is entered into on or after 1 July 2017 and the contract price is $750,000 or above, vendors will be deemed to be foreign residents unless they can prove otherwise through the provision of a Clearance Certificate from the ATO.  Vendors can apply for a Clearance Certificate at any time.  Clearance Certificates will be valid for 12 months and must be valid at the time the certificate is given to the purchaser prior to settlement.

Applications for Clearance Certificates can be made online to the ATO.

For more information please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.