Brought to You by Conveyancing Matters
Penny Erskine of Conveyancing Matters has provided this super-brief overview of the changes to the CGW threshold to give agents a basic understanding of the changes that apply to all contracts written from the 1st of July.
What’s the CGW?
The Federal Government is looking to ensure that all properties purchased by foreign residents do not escape paying their share of tax.
Every person selling a property must prove they are not a foreign resident by obtaining a clearance certificate by the ATO.
Capital Gains Withholding (CGW) is withheld by the purchaser and paid to the ATO, amounting to 12.5% of the contract price of the property purchased.
Previously this 12.5% withheld payment was only a concern to vendors selling properties with purchase prices greater than $2.2m. This threshold has now been reduced to just $750,000, covering a significantly greater share of the market.
Clearance Certificates – Avoiding Withheld Payments
In order to avoid the ATO holding 12.5% of the proceeds of sale, vendors must apply for a clearance certificate from the ATO to verify the purchaser’s obligations regarding withholding.
These certificates take 14 – 28 days to arrange and must be applied for, using the following link: https://www.ato.gov.au/FRWT_Certificate.aspx
These certificates are valid for 12 months, so encourage your vendor to obtain the clearance early-on in the sale process, and agents should hold a copy in their property file.
Conveyancing Matters are Giving Plenty of Advice on the Topic