By Gabrielle Lea -
Snapshot
- The main driver for the 2016 edition of the Contract is the Commonwealth’s new Foreign Resident Capital Gains Withholding Payments measure.
- You should use the 2016 edition if the contract might be exchanged on or after 1 July 2016, and the sale price may reach $2 million or more.
The Law Society and the Real Estate Institute of NSW have prepared the 2016 edition of the Contract for Sale and Purchase of Land (‘the Contract’). Like the 2014 edition, it is available in an electronic format only, via the Law Society’s online portal ECOS. A number of companies are also licensed to sell the 2016 edition. As with any new edition of the Contract, the changes reflect both legislative and practice changes.
New clause 31 Foreign Resident Capital Gains Withholding
The Commonwealth’s new Foreign Resident Capital Gains Withholding Payments measure (under new subdiv 14D, sch 1 to the Taxation Administration Act 1953), will require significant changes to conveyancing practice for the transfer of all land with a market value of $2 million or above. Australian resident vendors of real property with a market value of $2 million or above will need to apply for a clearance certificate from the ATO and provide this to the purchaser before completion. Without a clearance certificate, the purchaser is obliged under the new measure to withhold 10% of the purchase price on completion, and remit this amount to the ATO. To obtain a clearance certificate from the ATO, the vendor or their agent completes an application form online.
New clause 31 provides for a number of the new obligations required by the measure, such as the purchaser’s obligation to register with the ATO, draw a settlement cheque on completion for the withholding amount, and forward this immediately to the ATO following completion. To encourage parties to deal with the withholding obligation well before completion, the clause also provides that the purchaser does not have to complete earlier than 7 days after receipt of any clearance certificate or variation from the ATO.
An important consequential change has been made to cl 16.7, allowing the purchaser to withhold any required withholding amount from the balance of purchase money that would otherwise be paid to the vendor on completion. For more information on the withholding measure, see the ATO website.
