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New Capital Gains Tax (CGT) Withholding Provisions come into force on 1st July 2016.

For properties valued at or more than $2,000,000 a Buyer must withhold 10% of the purchase price and pay such monies to the Australian Taxation Office (ATO) on or before settlement, unless the Vendor has obtained a Clearance Certificate from the ATO (Taxation Administration Act 1953 (CTH) - Subdivision 14-D).

For more information about the new provisions click here

Where monies are to be withheld in accordance with this legislation, it will usually be done as part of the settlement process and should not affect an agent's responsibilities in respect of a real estate transaction.

Having said this, agents would be advised to make Sellers and Buyers aware of the situation where a property is likely to sell for $2,000,000 or more and both parties to the sale would be wise to seek legal advice from their legal advisors.

Where a Vendor wishes to obtain a Clearance Certificate from the ATO to avoid part of the proceeds of their sale being withheld, they would be wise to apply for the certificate well in advance of settlement, as turnaround on certificates are likely to be slow (at least in the early stages of this legislation). Once a clearance is received it remains in place for twelve (12) months.

In respect of property sales valued at $2,000,000 or more, ADL is preparing a new Special Condition for use with Sales Contracts, which will cover the requirements of the legislation. The new Special Condition will be released on 1st July 2016 as part of the distributed list of clauses associated with Item 15 (Special Conditions) of the ADL 'Contract of Sale of Real Estate'.

Click here for instructions on how to insert the new Special Condition into a Sales Contract

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