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The Foreign Resident Tax - Impact on Leases


Did you know that foreign resident capital gains withholding also applies to lease premiums of $750,000 or more paid for the grant of leases over real property in Australia?

What is it?

Foreign resident capital gains withholding applies to contracts entered into for the sale of certain taxable property in Australia on or after 1 July 2016. For contracts entered into on or after 1 July 2017, it will apply to certain taxable property in Australia where the contract price is $750,000 or above.

If the seller is a foreign resident, the purchaser must withhold 12.5% of the purchase price and pay that amount to the Australian Taxation Office (ATO). A purchaser does not need to withhold if the vendor provides a clearance certificate (issued by the ATO) to the purchaser which relieves the purchaser from this obligation.

A leasing example

If you are purchasing a leasehold interest in one of the Alpine areas of Victoria (for example Mount Buller, Mount Hotham or Falls Creek) for $750,000 or more, a clearance certificate will need to be provided by the vendor to you or you will need to withhold 12.5% of the purchase price and pay that amount to the ATO.

The contents of this publication is for reference purposes only. This blog post does not constitute legal advice and should not be relied upon. If you require legal advice, please contact Sarah Ward at Aitken Partners on (03) 8600 6056.


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