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Selling Real Estate in Australia - Clearance Certificate

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covers
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Selling Real Estate in Australia - Clearance Certificate

Postby covers » Tue, 13 Feb 2018 7:09 pm

Hi,

We moved to Singapore a few years and we love it here so we decided to sell our PPOR in Australia, for tax purposes we are no longer considered Australian tax residents.

Our property in Australia is our primary residence so I believe the 6 Year capital gains PPOR rule should apply however the ATO is saying otherwise:

Clearance Certificate and Variation Request rules below:

Residents

To be eligible for a Foreign Resident Withholding Clearance Certificate you must be a permanent resident of Australia for income tax purposes. This certificate enables the resident vendor to avoid the 12.5% withholding.

https://www.ato.gov.au/Forms/Capital-ga ... residents/

Non-Residents

Where the vendor is a non-resident of Australia for taxation purposes, 12.5% of the purchase (sale) price must be withheld by the purchaser on behalf of the vendor. Where the 12.5% withholding rate may be inappropriate, for example, if the amount withheld is too high compared to the actual Australian tax liability on the sale of the asset, a Variation application for foreign residents (online version) may be submitted in order to request to vary the withholding rate lower or to nil. Where the vendor has obtained a variation, the purchaser must withhold the amount that corresponds with the varied rate.

I have applied to the ATO for a variation application for exemption due to PPOR but they will not issue a Clearance certificate or acknowledge the a capital gains exemption?

Doe's anybody know a real estate tax specialist or have any experience with this?

Appreciate any advice.

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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Tue, 13 Feb 2018 8:49 pm

Yes I only became aware of this myself recently and am facing potentially a similar situation. Have you asked your solicitor or settlement agent for advice? This is all new to me as well and makes me wish I had completely sold out a few years back as I had planned and perhaps you feel the same.

From what I see does all property sale now (of any value) required a clearance certificate? Edit - I see this is for properties above $750,000 - I am in the clear. Alhamdullilah! Thank God I preferred investing in cheapies. You 'might' consider a straw purchase arrangement if your property is above $750,000.... sell it to family member at or the family trust at a reduced value and have them resell it at the true value. There would be transaction costs (stamp duty etc) and I am not exactly sure of the ethics although I believe it's perfectly legal to sell a property for less than market value and is done amoungst family members and trusts.... Depending on your joint ownership arrangements you might be able to have each partner/spouse sell their share for less than $750,000 to the new purchaser or straw purchaser (switch the ownership structure to 'tenants in common' with multiple owners?). Option 2 might be if one of you take up tax residency (the lower income earner), take over sole ownership and then sell the home while still tax resident in Australia?

Are you 'officially' a non tax resident or simply not filing in Australia (as many Aussies do - they leave - work overseas and don't file until if/when they return)?

Did you rent the property out AND claim negative gearing on it? If so are the tax returns up to date - that will stall the clearance cert for sure.

Are you using the foreign resident form or are you attempting to use the resident form?

How long have you been waiting for an answer?

Edit; do you need the cash/capital? IF you plan to eventually return to Australia and cannot avoid the 12.5% hit it may be better just to rent out or leave the property dormant.

Unfortunately my last tax classes were in the 1980's so this is also new to me.
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby covers » Wed, 14 Feb 2018 7:06 pm

Great article explaining the changes:

https://home.kpmg.com/xx/en/home/insigh ... 7-132.html

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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Mon, 19 Feb 2018 10:25 am

covers wrote:Great article explaining the changes:

https://home.kpmg.com/xx/en/home/insigh ... 7-132.html


Thanks. Although it's written by CPA's who (in Australia) are really just risk adverse tax collection agents. I don't see mention of any of the strategies (legal) that I've suggested.
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Mon, 19 Feb 2018 7:37 pm

http://www.smh.com.au/business/the-econ ... 4z0se.html

Useful opinion piece but it won't change a thing.
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Mon, 19 Feb 2018 8:08 pm

delete double post
Last edited by PNGMK on Mon, 19 Feb 2018 8:09 pm, edited 1 time in total.
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Mon, 19 Feb 2018 8:08 pm

Another report showing why the Oz Govt is trying to get on top of this.

https://www.macrobusiness.com.au/2017/0 ... ty-market/

I have multiple friends who own properties in Australian under pseudonyms.... as far as I am aware a land transfer still does not require a TFN??
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Mon, 19 Feb 2018 10:27 pm

Also this. The new VOI regulations.

https://residentialsettlements.com.au/new-voi/
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Re: Selling Real Estate in Australia - Clearance Certificate

Postby PNGMK » Sat, 14 Apr 2018 6:09 pm

I spoke to a CPA friend about this. Unlike most. Australian accountants he does not act as an agent of ATO.

His view :


I would suggest not making a mountain out of a mole hill.



The Capital gain is discounted by 50% - so $100K profit = $50K assessable income.
If you’ve never claimed expenses on it, you would be able to add these to your cost base.
So I think in fact, you’re probably not going to make an assessable Capital Gain anyway.
Take the money and let them chase you for it. And if they do, you have (in my view) a sustainable argument that you don’t owe anything anyway. As you don't file income taxes in Australia there is no mechanism for you to report and pay the CGT anyways.
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