New Australian rules for foreign resident capital gains withholding (FRCGW) have come into effect for all property contracts entered into on or after 1 July 2017.
The new rules will impact real property disposals where the contract price is $750,000 and above (previously $2 million). Whilst the FRCGW withholding tax rate is now 12.5 percent (previously 10 percent).
The changes mean that Australian residents selling real estate with a market value of $750,000 or more will need to apply for a clearance certificate from the Australian Tax Office to ensure amounts are not withheld from the sale proceeds.
Where a valid clearance certificate is not provided by settlement, the purchaser is required to withhold 12.5 percentt of the purchase price and pay this to the ATO.
The previous threshold and rate will apply for any contracts that were entered into before 1 July 2017, even if they are not due to settle until after 1 July 2017.
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