Pittwater Life August 2017 Issue

Unless an exception applies,
the vendor is a relevant
foreign resident if any of the
following apply:
n The purchaser knows the
vendor is a foreign resident;
n The purchaser reasonably
believes the vendor is a
foreign resident;
n The purchaser does not
reasonably believe the
vendor is an Australian
resident, and either
n Has a record about the
acquisition indicating that
the vendor has an address
outside Australia;
n Is authorised by the vendor
to provide a related financial
benefit (for example, make a
payment) to a place outside
Australia (whether to the
vendor or anyone else); and
n The vendor has a
connection outside Australia
of a kind specified in the
regulations;
The capital gains tax asset
to which the transaction
relates is taxable Australian
real property.
A vendor is not a relevant
foreign resident if they
provide the purchaser with:
A valid clearance
certificate in transactions
involving taxable Australian
real property or indirect
Australian real property
company title interests (even
if the vendor is an Australian
resident for other income tax
purposes);
A valid vendor declaration
in transactions involving
other assets covered by the
foreign resident capital gains
withholding law.
Clearance certificates are
valid for 12 months from
the date of issue and the
vendor may be able to use
it for multiple disposals of
real property or indirect
Australian real property
company title interests that
occur within that period.
The vendor does not have
to reapply for a clearance
certificate each time they
dispose of a property, so long
as the clearance certificate is
valid.
It is prudent for the vendor
to make application for a
clearance certificate well in
advance of settlement and to
provide it to the purchaser
in a timely fashion to ensure
The Local Voice Since 1991
that monies are not withheld
on settlement. Matters of
finance mortgages and the
like could be affected if the
clearance certificate is not
obtained. A well-organised
vendor could obtain a
clearance certificate from
the ATO prior to putting his
property on the market.
The introduction of this
legislation has been without
fanfare and we have found
that a lack of awareness of
the need to consider the
necessity or otherwise of
obtaining a clearance has
begun to cause problems in
some transactions. Where
banks and other financial
institutions are involved
parties to a transaction
might find they are unable
to settle their transaction
because 12.5% has been
withheld.
Another element which
has shown up in the early
stages of working with
this legislation is the need
for vendors to have their
taxation affairs in order as
they may come under ATO
checking as the clearance
certificate is sought.
The ATO has assured all
those involved in property
transactions that it is
automating the process for
issuing clearance certificates.
It has advised that if there
are data irregularities, e.g.
incorrect or incomplete
names, some manual
processing may be required
and the clearance certificate
may take 14 to 28 days to
issue.
There are many elements
to be considered with
the introduction and
implementation of this
legislation and there are
some teething problems.
Remember to consult
your lawyer for advice on
the ramifications of the
legislation as it applies to
your situation.
Comment supplied by
Jennifer Harris, of Jennifer
Harris & Associates, Solicitors,
4/57 Avalon Parade,
Avalon Beach.
T: 9973 2011. F: 9918 3290.
E: jenniferha@pacific.net.au
W: www.jenniferharris.com.au
AUGUST 2017 55
Business Life