Esplins Law Report in July 2016 contained an article by Stephen Rush regarding the new non-resident withholding tax regime. The regime, in short, provided that whenever a purchaser buys property in Australia for a price of $2 million or more the purchaser must withhold 10% of the purchase price on settlement and immediately pay it to the Australian Taxation Office unless the vendor produces a clearance certificate. The amount of $2 million was set in place by the Australian Government so that the majority of transactions would be excluded from the regime (i.e. everyday Australians buying property in Australia). However, from 1 July 2017 the amount of $2 million will reduce to $750,000 which means that the majority transactions, especially in New South Wales, will be subject to the regime. Additionally, the percentage to be withheld by a purchaser has increased from 10% to 12.5%.
In addition to the non-resident withholding tax regime, clients should be aware that from 1 July 2018 purchases of newly constructed residential properties or new subdivisions will be required to remit the GST payable as part of the purchase price directly to the Australian Tax Office at the time of settlement rather than to the vendor/developer. Currently, GST is included in the purchase price and it is the vendor/developer who remits GST to the Australian Tax Office. However, some developers are failing to remit the GST (despite having claimed GST credits on their construction costs).
Once the legislation has been drafted we will be able to advise what exactly this means for our developer clients and our clients purchasing property off the plan.