One thing that Australians hate more than anything is new taxes that have been introduced by stealth. This may sound a lot more dramatic than it actually is, however a new property tax that will come into force on the 1st July 2016 will create some turmoil for property owners.
In the middle of 2015, the Australian Tax Office (ATO) was handed ownership of the Australian Property Transaction Register, something they had been lobbying for for some time. From Friday 1st July 2016, all sellers of residential and commercial property worth in excess of $2 million will be deemed to be an overseas investor unless they can attain a special tax clearance.
Without the special tax clearance certificate, a vendor (seller) must deduct 10% from the purchase price which is immediately passed on to the ATO.
It is clear that the aim of the new tax is to close the loophole which created a leakage of tax revenues with particular regard to foreign investors. It has been clear to the government that Australia clearly has a ‘hidden’ offshore property buyers risk and the increase in foreign buyers in recent times only increases that risk.
From the ATO’s perspective, they began extrapolating all property transactions back to 1985 which is an enormous task and will obviously take time.
The new legislation is simply closing the door on those who acquire property illegally either from proceeds of crime or as non residents. Australian residents will get their tax clearance so long as they acquire the property within their declared earnings.
The coming weeks and months will prove to be an interesting spectacle as the impact if this new tax becomes obvious.