Changes to Requirements for Clearance Certificates and CGT Withholding Payments

The 2017 Federal Budget included a little-known change that will affect many property owners.

Last year’s Federal Budget introduced a capital gains tax withholding payment (CGT Withholding Payment) for properties that sold for $2,000,000 dollars or more.

This meant that if a property owner sold their property for a price of $2,000,000 or more, unless the property owner provided a purchaser with a clearance certificate prior to settlement, the purchaser was obliged to withhold 10% of the price and pay that withholding amount to the Australian Taxation Office.

From 1 July 2017, the CGT Withholding Payment threshold amount has been reduced from $2,000,000 to $750,000 and the withholding percentage increased from 10% to 12.5%.

This means that after 1 July 2017, if a property owner sells their property, and the sale price is $750,000 or more, the property owner will be obliged to provide the purchaser with a clearance certificate.  If the property owner fails to provide the purchaser with a clearance certificate, the purchaser will be obliged to withhold 12.5% of the price and pay that withholding amount to the Australian Taxation Office.

If you intend to sell your property, Bell Partners Legal can assist you in drafting your contract and obtaining a clearance certificate.  Please contact Deanna Jenkins, Head of Property Law at djenkins@bellpartnerslegal.com with any enquiries you may have.