What is a non-resident withholding credits clearance certificate?
A Non-Resident Withholding Credits Clearance Certificate is a document issued by the Australian Taxation Office (ATO) that can be used by Australian residents selling their property to notify the buyer and the ATO that foreign resident capital gains withholding tax does not need to be withheld from the sale of their taxable property.
When do I need one?
If the property being sold is below $750,000 in value, you do not require a Non-resident Withholding Credits Clearance Certificate.
However, if the property is valued at $750,000 or more, you as the vendor must provide an ATO clearance certificate to the buyer of your property. The buyer will not be required to withhold 12.5% of the purchase price for capital gains tax once they have seen the clearance certificate. (with indications it will soon rise to 15%)
How do you apply for one?
To apply for a Non-Resident Withholding Credits Clearance Certificate, you need to complete an online application form available on the Australian Taxation Office (ATO) website. The form is called the Foreign Resident Capital Gains Withholding Clearance Certificate Application Form (NAT 74883).
Please note that only the vendor who has legal title to the asset is required to obtain a clearance certificate for foreign resident capital gains withholding purposes. Conveyancers who are not legal practitioners or registered tax agents cannot complete the form on behalf of the vendor.
When can you apply for one?
You can apply for a Non-Resident Withholding Credits Clearance Certificate at any time, even before you enter into a contract for sale. The certificate is valid for 12 months.
Do I really need one?
If you are an Australian resident vendor who doesn’t want to have an amount withheld by purchasers, you should complete and lodge a clearance certificate application form.
Please note that if the vendor fails to provide the clearance certificate by settlement, the purchaser is required to withhold up to 12.5% of the purchase price.
How long does it take to get one?
The Australian Taxation Office (ATO) can take up to 28 days to issue you with a clearance certificate. It is recommended that you apply for the certificate as early as possible in the sale process. Once received, you should provide the clearance certificate to the relevant parties at least 28 days before the settlement or publication of the acquisition notice.
If the vendor fails to provide the Non-Resident Withholding Credits Clearance Certificate by settlement, the purchaser is required to withhold 12.5% of the purchase price and remit it to the Australian Taxation Office (ATO).
What happens if the Vendor doesn’t supply one?
If you don’t provide a clearance certificate at or before settlement, you will be considered a foreign resident, and 12.5% of the property purchase price must be withheld and paid to the ATO.
How can I get the withheld amount back?
If this happens, you must lodge a tax return (even if your income was below the threshold to lodge) to claim the credit that was withheld, or if capital gains tax (CGT) is applicable, a reduced amount.
If you are an Australian resident vendor who has had an amount withheld by purchasers, you can claim a credit for the amount withheld in your tax return. You can claim the credit in the income year in which the transaction was completed i.e. the contract date is the applicable date.
To claim the credit, you must lodge an income tax return and include the amount withheld. You must also include the payment summary provided by the purchaser.
In summary, thinking of selling your property within the next 12 months and it will sell for more than $750,000, then apply for the non-clearance withholding credit clearance certificate straight away.
https://www.ato.gov.au/single-page-applications/frwt-certificate
Need further assistance, please reach out to one of our team on 07 5494 9173.
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