As Purchaser, you may be required to withhold and pay part of the purchase price directly to the Australian Taxation Office (‘ATO’) at settlement. Failure to fulfil your withholding obligations can lead you having to pay interest and penalties in additional to the withholding amount/s from your own pocket.
If you are purchasing a new residential property or potential residential land (vacant land that can be used for residential purposes), you are generally required to withholding and pay part of the purchase price to ATO. The withholding amount is usually 1/11th or 7% (if the margin scheme applies) of the purchase price inclusive of GST.
The Vendor’s legal representative must indicate in the contract whether withholding is required and if so, the Vendor must provide you with a supplier’s notification which sets out the withholding amount and details of the supplier.
If you purchase a property valued at $750,000 or more, you must withhold and pay 12.5% of the value to the ATO unless each Vendor produces one of the following prior to settlement:• a valid ATO clearance certificate; or • a valid ATO variation reducing the withholding amount. This requirement is designed to assists the collection of Australian tax liabilities from foreign resident Vendors.
Disclaimer: Every property transaction is different, and the information provided may not be relevant to your circumstances. By using this site you agree that the information provided is for general purposes only and does not constitute legal, financial, or professional advice.
