The Government has released draft legislation for public comment. By way of background, on 6 November 2013, the Government announced that it would proceed with a 10 per cent non-final withholding tax on the disposal, by foreign residents, of certain taxable Australian property. The purpose of the regime is to assist in the collection of foreign residents’ capital gains tax liabilities.
Where the seller of certain Australian assets is a foreign resident, the buyer will be required to pay 10 per cent of the price to the Australian Taxation Office as withholding tax. This obligation will apply to the acquisition of an asset that is taxable Australian real property; an indirect Australian real property interest; or an option or right to acquire such property or interest.
This withholding obligation will not apply to residential property valued under $2.5 million. The purpose of this exclusion is to minimise compliance costs and ensure that the amendments are clearly inapplicable to most residential property sales conducted between Australian residents. This alleviates the need for purchasers to undertake the preliminary compliance obligation of determining the residency status of the vendor.
In October 2014, the Government released a discussion paper consulting on the design of the measure.
Closing date for submissions is Friday, 7 August 2015.
