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Property buyers could find themselves at risk of losing tens of thousands of dollars on settlement due to last week’s changes to property withholding tax, a tax expert says.
Murray Howlett, partner at Pilot Partners, says changes in the federal budget to the national property withholding tax regime presents increased risks for buyers purchasing real estate valued at $750,000 or more.
These risks potentially impact on sellers, buyers and advisers, he said.
Mr Howlett said that under the new rules, vendors of property with a value of $750,000 or more are required to obtain a residency clearance certificate from the ATO to avoid a compulsory 12.5 per cent withholding tax from the sale price.
The national property withholding tax was introduced on 1 July last year and was initially imposed on real estate valued at $2 million or more.
According to Mr Howlett, the primary purpose of the tax is to ensure foreign residents pay tax on certain Australian property transactions.
He said under the way the current law is structured, all Australian home buyers are deemed foreigners until proven otherwise.
“Estate agents, lawyers, sellers and buyers need to be more aware and understand the implications of this tax,” he said.
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