The Government has announced that it will introduce a 10% non-final withholding tax in relation to disposals by foreign residents of certain taxable Australian property. This withholding tax will apply irrespective of whether the proceeds of sale may be on capital or revenue account.
This will place the onus on purchasers of taxable Australian property, such as land and mining and exploration licences, to withhold 10% on the sale proceeds and remit the same to the Australian Taxation Office. If the purchaser gets it wrong then they are liable for the tax which ought to have been withheld.
There will obviously have to be some work done on the design rules because it is not immediately obvious from the announcement as to how a purchaser is to determine whether the person with whom they are dealing is a foreign resident or not. The issue of residency is often a moot point. There are still cases appearing before the tribunals and Courts on which the issue of residency is an issue.
However this measure will not apply to residential property transactions under $2.5m or to disposals by Australian residents.