New legislation has now been passed which could impact transactions involving the purchase of taxable Australian property from foreign residents. The most common transactions affected will be those involving real estate but it has a wider application to but not exclusively mining rights, property trusts and options over these items.
Essentially the purchaser is obligated to withhold 10% of the purchase price on payments made to foreign residents on contracts for taxable Australian property entered as of 1 July 2016. The withholding must be paid to the ATO unless certain conditions are met. This only has application for real property with a market value over two million dollars. The vendor can apply to the ATO for a ‘clearance certificate’ and once this is given to the purchaser they would not be required to withhold the 10%.
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