When capital gain tax withholding applies? see link

if the client is Australian resident

Australian resident vendors can avoid the requirement of the purchaser to withhold the 12.5% by providing one of the following to the purchaser prior to settlement:  

  • for Australian real property, a clearance certificate Australian resident vendors selling real property will need to obtain a clearance certificate ONLINE from us prior to settlement, to ensure they don't incur the 12.5% non-final withholding
    • separate applications in each vendor name only if there are multiple Australian Resident vendors disposing of the asset.
  •  for other asset types, a vendor declarationthe vendor may provide the purchaser with a vendor’s declaration to specify withholding isn't required on the acquisition of the asset.

  • regardless the fact if the property is main residence or not, the vendor needs to apply the clearance certificate to stop withholding tax on selling a property with value > $750,000 from 1/7/2017. 

  • if apply as individual, no supporting documents required. 
  • if apply as company or trust, yes supporting document required. 
  • ATO will further request if any documents needed.

Foreign Resident CGT withholding variation application

  • client can apply to vary the tax withholding rate
  • Reasons for a variation include:
    • the vendor will not make a capital gain on the transaction (for example, because they will make a capital loss or a CGT roll-over applies)
    • the vendor will not have an income tax liability (for example, because of carried-forward capital losses or tax losses)
    • a creditor of the vendor has a mortgage or other security interest over the property, and the proceeds of sale available at settlement are insufficient to cover both the amount to be withheld and to discharge the debt the property secures
    • a creditor acquires legal title to the property (that is, becomes the purchaser) as a result of an order for foreclosure, and its security would be further diminished as a result of having to comply with the withholding obligation.
  • Foreign residents claiming the main residence exemption as a reason for the variation

    • NOTE: 

    • supporting documents must have the sale contract for ATO to process, otherwise the application will be withdrawn and we need to re-submit the form.

    • On 9 May 2017 the Government announced that Australia's foreign resident capital gains tax (CGT) regime will be extended to deny foreign and temporary tax residents access to the CGT main residence exemption.
      • Capital gain is exempted for foreign resident if
        • Property held prior to 9/5/2017 and 
        • Disposed before 30/6/2019

  • online application for tax withholding rate variation:  
  • supporting documents attached with online application:
    • Sales contract (must have : the ATO will not process the application until the sales contract is provided to the ATO)
    • Purchase contract (attached)
    • Purchase settlement statement (attached)
    • Incidental costs (stamp duty, solicitor fees, etc.) (attached)
    • Improvement costs (repair & maintenance, renovation costs, etc.) (will send later in a separate email due to large size)
  • further supporting document if main residence exemption applies:
    • Address evidence (on bank statement, utility bills, etc.) for the period you lived there, specifically on: 
    • Details about where you were the rest of the time? 
    • Whether you have one or more other residences elsewhere in Australia under your name throughout the period