In June last year I wrote about the operation of the Foreign Resident Capital Gains Withholding Tax (FRCGWT) Regime.
Background
The regime commenced on 1 July 2016.
The effect of the current regime is that where foreign residents who dispose of Australian real property with a market value of $2 million or above, the purchaser is required to withhold 10% of the purchase price at settlement (not including adjustments) and pay it to the Australian Taxation Office. Australian resident sellers are required to provide a clearance certificate to avoid paying the withholding tax.
What are the changes?
The existing threshold and withholding tax rate under the current regime is set to change as at 1 July 2017. The following changes will apply to Contracts entered into on or after 1 July 2017:-
- The regime will apply to disposals of Australian real property where the Contract price is $750,000.00 and above (currently $2 million);
- The FRCGWT withholding tax rate will be 12.5% (currently 10%).
Whilst these changes apply to Contracts entered into on or after 1 July 2017, it will not affect Contracts previously entered into prior to that date which have settlements on or after 1 July 2017.
The changes to the regime will mean that there will be a significant increase in the number of transactions being subject to the FRCGWT. It will also mean that buyers and sellers of property with a purchase price of $750,000.00 or more will need to be aware of and comply with the FRCGWT requirements.
For more information regarding the changes please contact us.
