Foreign owners of property in Australia face new 10% selling tax
New laws introduced at the beginning of July mean that foreign owners of property in Australia worth £2 million or more face paying an extra 10% in tax.
Sellers must have proof that they are Australian citizens to avoid the tax which has been introduced in a bid to deter wealthy forging buyers from pushing up property prices.
The change came at a time when prices in Australian state capitals were soaring and much of this was blamed on so called wealthy investors, especially from China.
The Real Estate Institute of Australia (REIA) supports the legislation, but is concerned that there has not been enough publicity and stressed the importance of real estate and legal professionals understanding their obligations under the new laws.
‘Essentially this is the Goods and Services Tax (GST) process coming into effect in the housing market, which is long overdue in Australia,’ said REIA president Neville Sanders.
‘Failure to get a clearance certificate stating their Australian residency will mean vendors fall under the same conditions as foreign investors and will be required to pay this immediate 10% tax,’ he explained.
‘It is of the utmost importance that legal professionals ensure the timely receipt of clearance certificates for their clients, to ensure settlements proceed without delay,’ he added.
According to Peter Malone, chief executive of GlobalX Legal Solutions, it means that legal professionals are required to ensure their clients are taking the right steps in the selling or buying of property.
‘These changes will affect the growing number of high value homes of Australian buyers and sellers, so it is imperative legal professionals and conveyancers are prepared,’ he added.
The new legislation is expected to generate $330 million in revenue over the next four years, with a $770 million compliance cost over the next decade and has been introduced to deter wealthy investors pushing up property prices and making them less affordable for Australians.
Maloney said while the imposed tax on foreign investors would help boost the Australian economy and recoup investor funds sent offshore, it was crucial for legal and conveyancing professionals to understand the intricacies of the changes.
‘The onus of proof will now fall on Australian vendors to prove their residency status to exempt them from the new 10% non-final withholding tax but, provided property lawyers and conveyancers are prepared to ensure the necessary documents are readied in advance, this shouldn’t be a timely and complicated process or cause unnecessary delays in the settlement process,’ he explained.
‘We are currently offering our clients a range of informational webinars and sessions to equip them with the knowledge and technical understanding of these changes to ensure the buying and selling process remains a seamless and smooth process for their clients,’ he added.