(July 9, 2015)
On July 8, 2015 the Australian Government opened a consultation regarding a foreign resident capital gains withholding tax obligation on the purchasers of certain Australian assets where the purchaser has reason to believe the vendor is a foreign resident. In this respect the Australian Government released an Exposure Draft for public comment. The Australian Government also published Explanatory Materials.
High-level summary of the law proposal
The Exposure Draft imposes a 10 per cent non-final withholding obligation on the purchasers of certain Australian assets where the purchaser has reason to believe the vendor is a foreign resident.
The obligation does not require withholding as such, but does require the purchaser to pay 10 per cent of the purchase price to the Commissioner. This amount may be withheld from the payment the purchaser makes to the vendor.
The obligation will apply to the acquisition of an asset that is:
· taxable Australian real property;
· an indirect Australian real property interest; or
· an option or right to acquire such property or interest.
High-level summary of exemptions
To minimise the compliance costs that arise as a result of this obligation, no obligation is imposed in the following situations:
· Excluded transactions
o Transactions involving residential property valued less than $2.5 million
o An arrangement that is conducted through a stock exchange
o An arrangement that is already subject to an existing withholding obligation
· Vendor declarations provided to purchaser
o Where the vendor has made a declaration that they are an Australian resident for income tax purposes
o Where the vendor has made a declaration that they will be carrying on a business through a permanent establishment located in Australia immediately after the transaction
o Where, if the CGT asset acquired is a membership interest, the vendor has made a declaration that the interest is not an indirect Australian real property interest
Note that the vendor declarations only exempt a specific vendor and withholding may still apply if the transaction involves multiple vendors.
The Australian Government invites interested parties to comment on the draft legislation and draft explanatory memorandum. According to an announcement via which the Australian Government informed the public on the opening of the consultation the closing date for submissions is Friday August 7, 2015.
Click here to be forwarded to the Exposure Draft as available on the website of the Australian Treasury, which will open in a new window.
Click here to be forwarded to the Explanatory Materials as available on the website of the Australian Treasury, which will open in a new window.
For further information click here to be forwarded to the announcement of the public consultation as published on the website of the Australian Treasury.
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