From 1 July 2016, foreign residents will be required to obtain a clearance certificate from the Foreign Investment Review Board (FIRB) in respect of purchasing and from the Australian Taxation Office (ATO) in relation to the sale of property within Australia.
In relation to Vendors, for property transactions valued above $2 million, the purchaser is required to withhold 10% of the purchase price unless the Vendor shows the Purchaser a clearance certificate from the ATO. It is important to be aware that the certificate may be produced on or before settlement.
In the event that the Vendor does not produce a clearance certificate the purchaser will be required to withhold 10%, should the property transaction exceed $2 million, of the purchase price and pay to the ATO.
For Vendors who are Australian residents and are to receive more than $2 million from a sale, a clearance certificate should also be obtain to ensure no funds are withheld from the sale proceeds.
For purchasers who are required to pay the 10% withholding amount, a ‘Purchaser Remittance Form’ is required to be completed to provide details of the Vendor, Purchaser and the asset acquired to the ATO.
In relation to purchasers who are foreign residents, regardless of the purchase price, purchasers will either have to obtain a clearance certificate for a particular property – if they are unsuccessful in purchasing the property the fee is not refundable. Alternatively if the property is to be purchased at auction, a clearance certificate indicating the maximum amount the individual is eligible to bid is required.
The ATO have announced an automated process for issuing clearance certificates which may result in straightforward cases certificated being issued within 1-14 days. However where there may be data irregularities or exceptions or some manual processing required certificates may take 14-28 days to be issued.