The withholding capital gains rules have been up and running since July, but there is still some confusion – particularly about the timing of, and responsibility for, clearance certificates. Some people think it the agent’s job to organise the certificate – it is not.
Australian residents selling real estate valued at $750,000 or more need to apply for a clearance certificate. If a seller doesn’t give a buyer a clearance certificate, and the matter settles, the buyer will be required to withhold 12.5% of the purchase price from the sale proceeds (and pay that to the Australian Tax Office).
The following is a list of the most common questions we are being asked about clearance certificates, and our answers:
|But do the rules apply to vacant land?||Yes. The rules apply to vacant land, buildings, residential property, commercial property, leasehold and strata title schemes.|
|Do I need a valuation?||No – as long as the price is a genuinely negotiated figure.|
|If there is more than one buyer, will they all have to withhold 12.5%?||No, each purchaser is only required to withhold in proportion to their percentage of the total purchase price.|
|When does the clearance certificate need to be given?||The Australian Tax Office are of the view that a valid clearance certificate can be given at any time before settlement. Certificates stay valid for 12 months (and can be used for multiple transactions).|
|Doesn’t the agent just take care of that?||Only a vendor who is an Australian resident can be granted a clearance certificate by the Australian Tax Office.
It would be very unusual for this to be included in an agent’s scope of works. We find that most of our clients are happy to obtain their own clearance certificate, and we provide general direction and assistance.
|What if I don’t qualify for a clearance certificate?||If you are selling and you don’t qualify for a certificate, the buyer will need to withhold 12.5% of the purchase price. If withholding tax does not apply, the vendor can apply for a notice of variation.|