The system was implemented on 1 July 2016 and applies to both foreign and Australian residents. It is aimed at the collection of capital gains tax from foreign residents, therefore, there are exceptions for sellers who are not foreign residents, subject to the parties following the correct process, such as obtaining a clearance certificate from the ATO prior to settlement.
The changes applying from 1 July 2017 are as follows:
- the threshold is reduced from $2million to $750,000 and the system will now apply to all real property disposals where the market value of the property is $750,000 and above; and
- the withholding payment rate will be increased to 12.5% (from the the current rate of 10%).