Witholding tax on disposals made by non residents

New rules for foreign resident capital gains withholding (FRCGW) apply to vendors disposing of certain taxable property under contracts entered into from 1 July 2017. The changes will apply to real property disposals where the contract price is $750,000 and above (previously $2 million) and the FRCGW withholding tax rate will be 12.5% (previously 10%) unless a clearance certificate is obtained from the ATO. The existing threshold and rate will apply for any contracts that are entered into from 1 July 2016 and before 1 July 2017, even if they are not due to settle until after 1 July 2017.

Where a withholding obligation exists, the purchaser must withhold the relevant amount at settlement and pay it to the ATO without delay as a general interest charge may apply to late payments. The purchaser is required to complete an online Purchaser Payment Notification form at which time the purchaser will receive a payment reference number, and a payment slip allowing payment to be made.

The penalty for failing to withhold is equal to the amount that was required to be withheld. An administrative penalty may also be imposed.