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1 August 2017
Property Developments
Changes introduced to the Foreign Resident Capital Gains Withholding Tax Regime
The Government has widened the CGT withholding
regime for foreign residents selling Australian property.
The changes came into effect on 1 July 2017.
What is the old position?
If someone previously bought Australian real property (ie
land and buildings) for $2 million or more, they were
required to withhold 10% of the purchase price and remit
to the ATO. This withholding obligation did not apply if:
 the property was sold for under $2 million; or
 the property was sold for $2 million or more, and the
seller provided a ‘Clearance Certificate’ from the ATO
confirming that they are an Australian resident.
What is the new position?
The Government has from 1 July 2017:
 increased the withholding rate from 10% to 12.5% of
the purchase price; and
 decreased the $2 million threshold for the application
of the withholding tax obligations to $750,000.
These changes apply to all contracts entered into on or
after 1 July 2017.
What is the impact of the changes?
The impact of the changes is twofold:
 if the withholding obligation arises, the buyer will
need to withhold a higher percentage of the purchase
price to remit to the ATO; and
 the reduced threshold will result in a much higher
number of transactions being caught by the foreign
resident capital gains withholding tax regime.
What if the contract was signed before 1
July 2017 but hasn’t settled yet?
The changes to the threshold and withholding rate apply to
contracts entered into on or after 1 July 2017.
The prior threshold and withholding rate will apply for any
contracts that were entered into before 1 July 2017, but
settle after 1 July 2017.
Further information
If you would like advice on the implications of the foreign
resident capital gains withholding tax regime and how it
may impact you, please contact us.
*Disclaimer
The information contained in this update is intended as a guide only.
Professional advice should be sought before applying any of the
information to particular circumstances. While every reasonable care has
been taken in the preparation of this update, MinterEllison does not accept
liability for any errors it may contain.