Foreign Investors – the effect of Budget 2017 changes

By

Let’s recap on changes which have now taken effect following the latest Federal Budget.

The tax increases and charges to foreign buyers are estimated to bring in an extra $600 million for the government over the next 4 years. Buyers and sellers need to be on their toes in order to comply with the changes.

So what has actually changed?

  1. Capital Gains Tax

Foreign and temporary buyers will no longer be entitled to an exemption on Capital Gains Tax when selling their principal place of residence in Australia. This took effect 7:30pm (AEST), 9 May 2017. Existing properties held prior to the change will be entitled to an exemption until 30 June 2019.

  1. Withholding Tax Regime

Previously, all buyers of real property over $2million are required to withhold a percentage of the purchase price (unless the seller produces a clearance certificate from the ATO) and pay it to the ATO to allow the ATO to better collect payment of Capital Gains Tax from foreign owners.

In the budget, the threshold of $2million has been reduced to $750,000.00 to widen the ATO’s pool of CGT collection. The percentage of funds required to be withheld has also increased from 10% to 12.5%. This took effect from 1 July 2017.

This means that many more contracts fall under the new regime. All contracts for over $750,000.00 will require an ATO clearance certificates in order for the seller to receive full sale price at settlement.

  1. Charge on Unoccupied Property

The Government has introduced a charge of at least $5,000.00 for foreign owners of residential property where their property is not occupied or not genuinely available on the rental market for at least 6 months per year; the “Foreign Investors Tax Levy”. This charge will be levied annually.

  1. Limit on sale to foreign investors

The Government has introduced a cap on the total number of dwellings a developer can sell to foreign persons under a New Dwelling Exemption Certificate.

If you have any questions about these important changes for foreign investors, please contact our team of property and conveyancing lawyers today.

Tagged in: , , , , , , , , ,


You may also be interested in:

6 Things You Can Expect When Declaring Bankruptcy

Declaring bankruptcy should be your last resort when you are faced with financial difficulties, whether as an individual or as a business owner. It is not exactly a “Get Out of Jail Free” card, as it comes with many adverse consequences, which may significantly impact your financial standing over a considerable period. So what consequences continue reading

How do you determine if a company is insolvent?

The answer to the question “How do you determine if a company is insolvent?” is important because there are serious consequences for a director if debts are incurred after the company has become insolvent, including civil penalties, compensation proceedings and criminal charges. However, it is often difficult to know when a company has crossed the continue reading

What to do if you receive an ATO Director Penalty Notice

Did you know that company directors may potentially become personally liable for unremitted Pay As You Go (PAYG) deductions and Superannuation Guarantee Charges (SGCs)? The Australian Taxation Office (ATO) has significant powers to recover a company’s unpaid liabilities personally through its directors and may issue a Director Penalty Notice (DPN). This article focuses on the continue reading

Liability Limited by a scheme approved under professional standards legislation | Website by VA