- apply to ALL SALES, ANY SALES OF CGT ASSETS IN AUSTRALIA (even the name of this rule called: Foreign resident capital gains withholding


Foreign capital gain tax withholding diagram.docx


Vendor will be withheld tax on selling ANY Australian property if the vendor cannot obtain “Clearance Certificate” or “Vendor declaration”


    • From 1/7/16 – 1/7/2017: contract price > $2 million – 10% tax withholding rate
    • From 1/7/2017: contract price > $750,000 – 12.5% tax withholding rate

  • if the vendor is Australian resident:
    • the vendor need to apply either “Clearance Certificate” or “Vendor Declaration” to avoid being withheld 12.5% tax
    • if the vendor don’t obtain the “Clearance Certificate”,
      • the ATO will send a notification letter, confirming the tax withholding amount
      • At year-end tax return, Capital gain withholding tax can be manually entered into label 18X, to get the credit back.


  • If the vendor is foreign resident: they will be withheld 12.5%.
    • Or they can apply for variation rate (e.g. Hoang Anh ‘s case)


  • Example:

purchasers will withhold 12.5% of the purchase price and pay it to ATO

e.g. - selling price $1000k

- tax withholding $200k

net amount purchaser pays to vendor $800k

  • purchaser pays $200k to the ATO
  • the Vendor will get $200k credit back when lodging tax return - label 18X, ATO will provide the notification letter (confirming the capital gain withholding amount).


Research :

Confirmation call with the ATO: ref 105 137 795 9364

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Calculating-a-capital-gain-or-loss/Capital-gains-withholding--Impacts-on-foreign-and-Australian-residents/?anchor=Vendor#Vendor





Vendor 
Purchaser
Australian resident tax purpose
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: Australian resident vendors selling real property will need to obtain a clearance certificate from us prior to settlement, to ensure they don't incur the 12.5% non-final withholding
for other asset types, a vendor declaration
For other property: the vendor may provide the purchaser with a vendor’s declaration to specify withholding isn't required on the acquisition of the asset.
If the vendor does not provide the above documents --> the vendor is treated as a foreign resident
purchasers to withhold 12.5% of the purchase price and pay it to ATO
e.g. selling price $1000k
tax withholding $200k
net amount pay to vendor $800k
purchaser pays $200k to the ATO
the Vendor will get $200k credit back when lodging tax return.
Foreign resident tax purpose
The foreign resident vendor must:
lodge a tax return at the end of the financial year,
declaring their Australian assessable income, including any capital gain (profit) from the disposal of the asset.
The vendor may claim a credit for any withholding amount paid to us in their tax return.
--> ATO withhold the tax on selling the property to make sure the foreign vendor has already pay some tax to the ATO on selling the property
Foreign resident vendors may apply for a variation of the withholding rate or make a declaration that a membership interest is not an indirect Australian real property interest and therefore not subject to withholding
purchasers to withhold 12.5% of the purchase price and pay it to ATO

From <https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Calculating-a-capital-gain-or-loss/Capital-gains-withholding--Impacts-on-foreign-and-Australian-residents/