The sale or purchase of a property can have tax implications.

Where a property is not a person’s principal place of residence capital gains tax (CGT) is payable on any increase in the value of the property (if purchased on or after 20 September 1985) and the sale price.

If you are the seller and the property is worth $750K or more (previously it was $2 million) you are now required to provide a tax clearance from the ATO prior to settlement regardless of whether the property is an investment or your home. If you don’t provide one the buyer has to withhold 12.5 % of the sale price and send it to the ATO. The retained amount will be kept by the ATO as a credit against tax payments.

While the law is directed at getting tax from foreign residents selling Australian property and departing without paying GST, every seller of property of $750k or above is required to obtain an ATO clearance certificate. A clearance may not be granted where a person’s tax affairs are not up to date.

The long hand of the ATO has also been extended to collecting GST from some property transactions at the time of sale. The changes are directed at suppliers of new land and new house and land packages. A seller must now declare in the contract whether GST is to be withheld on the sale, and if so the amount payable. If an amount is to be withheld the buyer must pay the amount to the ATO.

The standard REIQ contracts have been amended to account for these changes.

From both changes it’s pretty clear that buyers and their lawyers are now tax collectors. As the Beatles song says:

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Cause I’m the taxman, yeah, I’m the taxman

And you’re working for no one but me



John Greenhalgh

John Greenhalgh
Solicitor Director