The ATO is getting smarter
June 12, 2017
Written by Janet Hryb – LJ Hooker Settlements
The Australian Taxation office (ATO) has been working very strongly over the last 12 months or more on their computer systems for data information and collection.
As I mentioned in my last year’s article, The ATO worked on capturing foreign investors who haven’t paid their taxes by blanketing a national rule, that any owner selling any properties over the sale price of $2 million was to apply for a clearance certificate with the ATO. If this clearance certificate did not come through in time for settlement, the Buyer (via their settlement agent/Solicitor) had to on settlement day, pay 10% of the sale proceeds to the ATO.
A clearance certificate notifies the purchaser not to withhold foreign resident capital gains from the sale of taxable Australian real property (the asset). The application form also provides the details of vendors so they can establish their tax residency status. Where there are multiple vendors disposing of the asset, each vendor should apply for a separate clearance certificate in their name only.
The ATO had a few hiccups in getting the clearance certificates available once a contract was executed, however now if the owner is not foreign and the ATO do not see any issues with the Seller, they issue this certificate in around 24 to 48 hours electronically.
So now that the ATO feel they can handle these certificates and the ATO must be collecting a good amount of money from these sales…….their new requirement with any contracts dated after 1st July 2017, their new blanket rule nationally is any seller selling a property with a sale price of $750,000 or more is to apply for a clearance certificate and provide to the buyer before settlement, otherwise the buyer is obliged to pay to the tax department $12.5% of the sale proceeds on settlement day.
What the ATO are finding, is that they are using this opportunity to not only verify if you are a foreign resident, but in the case of Australian Citizens, they are chasing up tax debts and anyone who has not lodge a tax return in 2 or more years. Recently an older person in Sydney sold a $2m plus home but had not lodged a tax return in decades, so the ATO used this against her and didn’t issue the clearance certificate until they obtained from her what was required, causing her to pay penalties for the settlement delay.
So if you are selling a property over the amount of $750k, and you haven’t done a tax return in 2 or more years….. you better start looking into sorting that out ASAP.
More obligation is continuing to be placed upon settlement agents by government departments…..it’s important that you use a settlement agent that keeps you up to date with what is happening and understands the requirements for you so contact them prior to even entering into a contract to find out things that could assist you before you do so.
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